2018 (10) TMI 620 - AT - Central Excise

CENVAT credit - service tax paid by the job worker - N/N. 12/2003-ST. - Held that - If the service provider has opted not to avail the exemption Notification No. 12/2003-ST and paid the service tax on the entire value including material cost, no objection can be raised either on the payment of service Tax and consequently, on the part of the service recipient for availing the CENVAT credit - The service tax paid by the service provider on the gross value which includes the material cost cannot be disputed consequently eligibility to CENVAT credit on the said service tax can also not be objected on the part of the appellant - credit allowed - appeal allowed - decided in favor of appellant.

Summary

Issues:
Whether the appellant is entitled to avail CENVAT credit on service tax paid by the job worker for job work including material cost.

Analysis:
The case involved the appellant engaged in manufacturing excisable goods and paying excise duty, with job work done by a job worker who paid service tax on the entire value of the service, including the material cost. The department denied the CENVAT credit on the service tax attributed to the material cost, citing exemption Notification No. 12/2003-ST.

Appellant's Argument:
The appellant's counsel argued that the appellant rightfully availed the CENVAT credit, emphasizing that the recipient cannot question the correctness of service tax payment by the service provider. Several judgments were cited to support this position.

Revenue's Position:
The Deputy Commissioner representing the Revenue reiterated the findings of the impugned order.

Decision and Reasoning:
After considering the submissions and records, the Member (Judicial) concluded that the appellant is entitled to the CENVAT credit. The decision was based on two main points: firstly, the appellant is entitled to the credit regardless of the service provider's payment correctness, and secondly, the service provider is required to pay service tax on the gross value of the service, including the material cost. The Member highlighted that the service provider's choice to pay tax on the entire value, including material cost, without opting for exemption, allows the recipient to avail the credit. Unlike the Central Excise Act, the service tax law does not compel availing exemption notification, giving the service provider the liberty to choose the tax payment method. Therefore, the service tax paid on the gross value, including material cost, cannot be disputed, and consequently, the appellant's eligibility for CENVAT credit stands. The impugned order was set aside, and the appeal was allowed.

This detailed analysis of the judgment clarifies the issues involved, the arguments presented by both sides, and the reasoning behind the decision, ensuring a comprehensive understanding of the legal aspects discussed in the case.