Cenvat Credit - admisibility of when job-worker paid duty even though eligible for Exemption u/Notf No. 8/2005-ST

PJ/Case Laws/2011-12/1563

Cenvat Credit - admisibility of when job-worker paid duty even though eligible for Exemption u/Notf No. 8/2005-ST - stay granted

Case: M/s RAYMOND UCO DENIM PVT LTD. Vs. COMMISSIONER OF CENTRAL EXCISE, NAGPUR

Citation: 2012-TIOL-272-CESTAT-MUM

Issue:- Service tax paid by job worker who was eligible for availing exemption under Notification No. 8/2005-ST but did not avail the same – admissibility of credit credit when no action taken by Revenue – prima facie, matter in favour of assessee.

Whether credit is available for service tax paid on courier service employed for transportation of ‘samples’ to various customers? – no evidence produced showing courier expenses part of price of samples – pre-deposit ordered.

Brief Facts:- The demand of Rs. 395771/- is confirmed against the Applicant in respect of Cenvat credit of service tax paid by job work. The demand of duty is on the ground that as per Notification no.08/2005-ST, the job worker is not required to pay service tax on the process undertaken by them. So, as the job worker has wrongly paid the service tax the applicants are not entitled to take credit. The Revenue has accepted the duty paid by the job worker and no proceedings were initiated against the job worker. The demand of Rs.9416769/- is confirmed after denying the credit of service tax paid on Courier services used for transportation of samples of finished goods from the place of removal to buyer premises.

Applicants filed this application for waiver of pre-deposit of duty of Rs.9812540/-, interest and penalty.

Appellant’s Contention:- The contention of the applicants is that the applicants are manufacturing certain qualities/ types of denim fabrics which were sent to various customers as samples through couriers. The contention is that as the samples were cleared on payment of appropriate duty which have been sent through courier services therefore, the courier service received is in or in relation to their final product.

They also submitted the show cause notice was issued demanding duty for the period 1.1.2005 to 31.8.2009.The contention is that they were regularly returns showing taking credit of service tax paid on courier services. The show cause notice is issued by invoking extended period of limitation on the ground of suppression of facts with intent to evade payment of duty. As the applicants were filing regularly returns for taking credit of service tax paid on courier services and also showing utilisation of credit, therefore, the allegation of suppression with intent to evade payment of duty is not sustainable.

Respondent’s Contention:- The contention of the revenue is that some period of dispute is within the normal of limitation. It is also submitted that the place of removal as defined under sec.4 of the Central Excise Act, 1994 is a factory or any other place of production of goods and in the present case, the courier service is received after the clearance of goods from the factory gate therefore, the service relates to post clearance of the samples and nothing to do with the manufacture of samples. Therefore, the credit was rightly denied.

Reasoning of Judgment:- The Tribunal noted that the Punjab & Haryana High Court in the case of GUJARAT AMBUJA CEMENT VS. CCE reported in 2009(236)ELT 431 held that the credit of service tax on outward freight is admissible if the same is part of price of goods. In the present case, the applicants had not produced any evidence tp show that the courier expenses are part of the price of the samples. Taking into account the facts and circumstances of the case and also the arguments on the issue of limitation, the applicants are directed to deposit an amount of Rs. 10 lakhs within a period of 8 weeks. On deposit of the aforesaid amount, pre-deposit of the remaining amount of duty, interest and penalty is waived and recovery therefore is stayed during the pendency of the appeal.

Decision:- Application disposed off accordingly.

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PJ/Case Laws/2011-12/1563

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