2009 (10) TMI 181 - AT - Service Tax

Cenvat Credit- Notification No. 8/2005-ST dated 1.3.2005- Whether Cenvat Credit of service tax paid by a job-worker on the taxable service received by the respondent is liable to be denied to the latter on the ground that the job worker was not liable to pay the tax by virtue of exemption Notification No. 8/2005-ST dated 1.3.2005? In the light of the decision of CCE v. DIL Ltd. 2008 14 STT 210 (Mum. - CESTAT) held that a notification issued under section 93 of 1994 Act would exempt a provider of taxable service from payment of service tax leviable under section 66 but that would not detract from settled legal position that Cenvat Credit of service tax paid by service provider is available to service recipient.

Summary

Issues:
Whether CENVAT credit of service tax paid by a job-worker on the taxable service received by the respondent can be denied based on the job-worker's exemption from paying tax under Notification No. 8/2005-ST.

Analysis:
The judgment addresses the issue of denying CENVAT credit of service tax paid by a job-worker based on the job-worker's exemption from paying tax under Notification No. 8/2005-ST. The Tribunal clarified that the issue has been settled through previous decisions. In the case of CCE v. DIL Ltd., it was established that even if the job-worker was exempted from paying service tax, the recipient of the service could still avail the CENVAT credit. The Tribunal dismissed the department's appeal against the Commissioner (Appeals) decision justifying the availment of CENVAT credit in such cases. The Tribunal emphasized that the legal provision allows the service recipient to avail CENVAT credit of the service tax "paid" by the service provider, not "payable." This distinction is crucial, as the exemption granted under Notification No. 8/2005-ST does not affect the availability of CENVAT credit to the service recipient. The Tribunal highlighted that the exemption was issued under section 93 of the Finance Act, which exempts the service provider from paying service tax leviable under section 66. Despite the exemption, the settled legal position remains that CENVAT credit of service tax paid by the service provider is accessible to the service recipient under rule 3 of the CENVAT Credit Rules, 2004.

In conclusion, the Tribunal upheld the impugned order, dismissing the department's appeal. The judgment reaffirms the established principle that the recipient of a service can avail CENVAT credit of the service tax paid by the service provider, even if the provider was exempted from paying tax under a specific notification. The distinction between "paid" and "payable" in the legal provisions was crucial in determining the availability of CENVAT credit, emphasizing that the exemption under section 93 of the Finance Act does not preclude the service recipient from claiming such credit under rule 3 of the CENVAT Credit Rules, 2004.