2010 (8) TMI 28 - HC - Service Tax

Cenvat Credit - industrial cleaning services - services are being provided to sister concern - service tax was paid by the assessee on behalf of sister concern (since sister concern was not registered) - after making payment of service tax on behalf of sister concern, assessee availed the cenvat credit on the basis of TR-6 challan - Held that - It is clear from the finding recorded above that the service provider who issued invoices was the sister concern of M/s Star Security and Employment which was already registered and had discharged service tax liability under TR-6 challan. There was, thus, no ground to reject the claim for Cenvat Credit - credit allowed

Summary

Issues: Appeal by revenue under Section 83 of the Finance Act, 1994 read with Section 35G of the Central Excise Act, 1944 against CESTAT order.

In this judgment, the High Court addressed the appeal by the revenue against the order passed by the Customs, Excise and Service Tax Appellate Tribunal (CESTAT). The substantial questions of law proposed were whether Cenvat Credit could be allowed based on TR-6 Challans issued by a person other than the service provider and whether the penalty under Rule 15 of the Cenvat Credit Rules, 2004 could be set aside. The assessee, engaged in manufacturing and rendering cleaning services, availed Cenvat Credit for payments made to M/s Star Professional Services. The adjudicating authority initially rejected the claim, leading to a demand for service tax and imposition of a penalty. The appellate authority upheld this decision, but the CESTAT accepted the plea of the assessee. The Tribunal found that the service provider, M/s Star Professional Services, was related to another registered entity, M/s Star Security and Employment, which had paid the service tax and discharged the liability under TR-6 Challan. The Tribunal concluded that the assessee was entitled to the credit based on this arrangement, especially considering the subsequent registration of M/s Star Professional Services and the payment of service tax. The High Court noted that the finding was not perverse, leading to the dismissal of the appeal.

The key issue revolved around the eligibility of the assessee to avail Cenvat Credit for payments made to M/s Star Professional Services. The dispute arose due to the lack of service tax registration and payment by M/s Star Professional Services during a specific period. However, the Tribunal found that the services were provided through a sister concern, M/s Star Security and Employment, which was registered and had discharged the service tax liability under TR-6 Challan. This relationship between the entities, along with the subsequent registration and payment of service tax by M/s Star Professional Services, formed the basis for allowing the Cenvat Credit to the assessee.

Another significant issue was the imposition of a penalty under Rule 15 of the Cenvat Credit Rules, 2004. The Tribunal had set aside this penalty, which was a subject of appeal by the revenue. The High Court, after considering the findings and reasoning of the Tribunal, concluded that there was no valid ground to reject the claim for Cenvat Credit. Since the Tribunal's decision was not deemed perverse, the High Court dismissed the appeal by the revenue, thereby upholding the Tribunal's decision in favor of the assessee.