Admissibility of cenvat credit to the assessee for CHA Service provided by the sub contractor to the main contracto

PJ/CASE LAW/2016-17/3086

Case-MRF LTD. Versus COMMISSIONER OF CENTRAL EXCISE, CHENNAI

Citation-2016 (41) S.T.R. 859 (Tri. - Chennai)

Brief Facts-The short dispute in this appeal is whether the contractor which had engaged sub-contractor to provide the services and the services so provided suffered service tax, shall disentitle the contractee to avail credit of the service tax so paid to the sub-contractor by the contractor.
The appellant took credit of service tax on the basis of invoices raised by M/s. VPC Freight Forwarders (P) Ltd., Chennai which was contractor for M/s. MRF Ltd. The service provider M/s. VPC Freight Forwarders (P) Ltd., engaged M/s. SRS Cargo International and others to provide the service meant for M/s. MRF Ltd. The services so provided by them were in the nature of a CHA. To such extent fact is not in dispute.
The dispute arose when bills raised by M/s. SRS Cargo International and others on M/s. VPC Freight Forwarders (P) Ltd., and such bills recovered service tax from M/s. VPC Freight Forwarders (P) Ltd., and M/s. VPC Freight Forwarders (P) Ltd. passed such liability to M/s. MRF Ltd., and M/s. MRF Ltd., claimed Cenvat credit of the tax so paid by it to M/s. VPC Freight Forwarders (P) Ltd.
Revenue’s dispute is that possibility of availing of Cenvat of the M/s. VPC Freight Forwarders (P) Ltd., may not be ruled out since service tax was paid by M/s. VPC Freight Forwarders (P) Ltd., to M/s. SRS Cargo International and others. But such an apprehension could not be established by Revenue without an enquiry done by the Department from any corner.

Appelants Contention-Learned counsel drew attention to Page 154 of the appeal folder in Appeal Record No. E/42430/2013. He says that M/s. VPC Freight Forwarders (P) Ltd., has categorically stated as to what was the modus operandi between it and the service providers i.e., M/s. SRS Cargo International and Others. M/s. VPC Freight Forwarders (P) Ltd., brought out that service tax paid to the service provider i.e., M/s. SRS Cargo International & Others was in respect of the same service that was provided to M/s. MRF Ltd., and it had not claimed Cenvat credit of the service tax so paid by it to M/s. SRS Cargo International and others. When an enquiry to this aspect was requested, department did not conduct the same at the end of M/s. SRS Cargo International and others.

Respondents Contention-Learned departmental representative submits that when there was no link between the services provided by sub-contractor and the service if any received by the appellant, the Cenvat credit is not allowable to it.

Reasoning Of Judgement-Heard both sides and perused the records. There is no difference on the fact that the services of CHA who were M/s. SRS Cargo International and others was availed by M/s. MRF Ltd., through its agency M/s. VPC Freight Forwarders (P) Ltd., who in turn engaged M/s. SRS Cargo International and others to clear the imports of M/s. MRF Ltd. The service provider M/s. SRS Cargo International and others were no doubt engaged by M/s. VPC Freight Forwarders (P) Ltd., to cater to the need of M/s. MRF Ltd. That is not in doubt. Once there is no question on provision of service and that is attributable to the goods imported by appellant, denial of the credit of the service tax paid by appellant, to M/s. VPC Freight Forwarders (P) Ltd., shall be prejudicial to the interest of justice. Department should have enquired as to whether any service tax was paid by M/s. VPC Freight Forwarders (P) Ltd., to M/s. SRS Cargo International and others and such taxes have gone to the treasury. For no such enquiry, the appeals where penalty was imposed on the Head Office of M/s. MRF Ltd., those are allowed; waiving such penalties as well as setting aside that part of the impugned orders and the appeals which involved the disallowance of Cenvat credit with interest and penalty are also allowed which are in respect of different units of M/s. MRF Ltd. setting aside the impugned order on that count. Consequential relief, if any shall follow in accordance with law.

Decision-Appeals allowed

Comment-In the given case servicesare received from main contractor who engaged sub-contractor for providing such services. The point of dispute here is whether the Credit of Service Tax paid on invoices issued by main contractor denied alleging main contractor would have availed credit on bills raised by sub-contractor. But in the given case Revenue does not made any enquiry as to whether main contractor taken credit in respect of bills raised by sub-contractor, denial of credit of Service Tax paid by assessee to main contractor not justifiable and accordingly assessee’s Head office as well as their other units entitled to credit and penalty also not imposable.

Prepared By-Neelam Jain

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PJ/CASE LAW/2016-17/3086

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