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2016 (8) TMI 1026 - AT - Central ExciseCenvat credit - manpower supply services - availed the input service in their manufacturing activity - whether 75% of service tax payable by the respondent should be considered as ineligible for credit when the provider of service was to pay only 25% of service tax having been paid 100% of the service tax - Held that - 75% of the service tax, which is sought to be denied is admittedly paid to the Government by the provider of service instead of recipient of service. In any case, the service tax has been discharged and denial of the credit on this ground is not sustainable. - Decided in favour of appellant
Issues: Denial of cenvat credit on input service due to incorrect payment of service tax by the service provider.
Analysis: The appellant appealed against the denial of cenvat credit amounting to ?93,395 on manpower supply services used in their manufacturing activity. The issue revolved around the change in service tax liability from 1.7.2012, where both the service provider and recipient were liable in a 25:75 proportion. The appellant, during July and August 2012, received taxable services with the service provider paying the full service tax instead of the stipulated 25%. The Revenue objected to the credit claiming the appellant should have paid 75% of the service tax, leading to an inadmissible excess credit. Upon hearing both sides and reviewing the records, it was noted that the appellant's eligibility for credit and full payment of service tax on the input service were not in dispute. The crux of the matter was the disagreement over the proportion of service tax payment. The appellant argued that since the service provider paid 100% of the tax instead of 25%, the 75% deemed payable by the appellant should not render the credit inadmissible. The Tribunal acknowledged that the service tax had been duly discharged to the government, albeit by the service provider, making the denial of credit on this ground unsustainable. In light of the above facts, the Tribunal found no merit in the impugned order and set it aside, thereby allowing the appeal in favor of the appellant. The judgment emphasized that the service tax had been paid, and denying credit based on the payment proportion was unwarranted. The order was dictated and pronounced in open court, concluding the matter.
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