Whether credit of service tax paid mistakenly by job worker admissible?

PJ/CASE LAW/2016-17/3125

Case:-COMMISSIONER OF CENTRAL EXCISE, DELHI-IIIVs FIAMM MINDA AUTOMOTIVE LTD

Citation:-2016-TIOL-930-CESTAT-DEL

Brief facts:-Revenue was in appeal against the impugned order dated 30.01.2009 passed by the Commissioner (Appeals), Central Excise, Delhi-III, setting aside the adjudication order wherein, Cenvat credit taken by the respondent on the disputed services has been disallowed.

The grievances of the Revenue in this appeal are as follows:-

Banking and other financial services received by the respondent are towards payment of export clearance of the final product and the service tax paid thereon was not admissible for Cenvat credit since, the provision of service was beyond the place of removal. That courier services had no direct or indirect nexus with the manufacture of the excisable goods in the factory of the respondent. That though maintenance of canteen facility was a statutory obligation under the Factories Act, but the said service was not confirming to the definition of input service being not related to the manufacture of finished goods. That job work activities were exempt from payment of service tax and since the service provider had inadvertently paid the tax, the same was not available to the recipient of service as Cenvat credit. That input service received by DTA Unit cannot be transferred to the EOU unit.

Appellant’s contention:-Banking and other financial services received by the respondent are towards payment of export clearance of the final product and the service tax paid thereon was not admissible for Cenvat credit since, the provision of service was beyond the place of removal. That courier services had no direct or indirect nexus with the manufacture of the excisable goods in the factory of the respondent. That though maintenance of canteen facility was a statutory obligation under the Factories Act, but the said service was not confirming to the definition of input service being not related to the manufacture of finished goods. That job work activities were exempt from payment of service tax and since the service provider had inadvertently paid the tax, the same was not available to the recipient of service as Cenvat credit. That input service received by DTA Unit cannot be transferred to the EOU unit.

Reasoning of judgment:-Banking and other financial services were covered in the inclusive part of definition of input service under the head "financing". Further, the said services have been used/utilised for accomplishing the purpose of business. Thus, cenvat credit of service tax paid on such service is available to the manufacturer/service provider, in terms of Rule 2(l) of the Cenvat Credit Rules, 2004.

The outdoor catering service had been received by the respondent for providing canteen facilities to its employees, which was statutorily required to be complied with under Section 46 of the Factories Act. The issue as to whether the cenvat credit was available on the said service, was squarely covered by the judgment of Hon'ble Karnataka High Court in the case of Commissioner of Central Excise, Bangalore -III vs. Stanzen Toyotetsu India (P) Ltd. reported in 2011 (23) S.T.R. 444 (Kar.) = 2011-TIOL-866-HC-KAR-ST. The relevant portion in the said judgment is extracted herein below:-

"Canteen Service :

12. It is in this context that when the assessee provides outdoor canteen facilities because of a statutory obligation imposed on him under Section 46 of the Factories Act, it becomes a condition of service as far as the employees are concerned. He has paid the service tax on outdoor canteen services. The said expenses incurred by the assessee will also be taken into consideration before fixing the price of the final product. It may be a welfare measure but certainly it is not a charity provided by the employer to the employees. It is an onerous legal obligation imposed on him. The cost incurred in rendering such service will be included in the cost of production."

With regard to courier service, he found that the Commissioner (Appeals) had allowed cenvat credit on such service, placing reliance on the decision of this Tribunal in the case of CCE, Hyderabad- IV vs. Deloitte Tax Service India Pvt. Ltd. reported in 2008 (11) S.T.R. 266 (Tri. Bang.) = 2008-TIOL-629-CESTAT-BANG. He also found that this Tribunal in the case of Commissioner of Central Excise, Delhi-III vs. Mindarika Pvt. Ltd. 2015 (39) S.T.R. 309 (Tri. Delhi) had allowed Cenvat credit on courier service holding that the said service was integrally connected to the business of the manufacturer/service provider.

The respondent had availed Cenvat credit of service tax paid by various job workers on business auxiliary services, which according to the Revenue was not leviable to service tax. Since service providers were registered with the Service Tax Department and service tax paid by them were accepted and retained as statutory dues by the jurisdictional Service Tax authorities, the same cannot be denied at the recipient's end on the ground that the said service was not liable to payment of service tax. Since the respondent herein had taken cenvat credit of service tax on such service, on the strength of valid and proper invoice, evidencing payment of service tax, taking of such credit is in conformity with the Cenvat statute.

With regard to transfer of cenvat credit by the respondent from its DTA Unit to EOU Unit, the Commissioner (Appeals) had allowed the cenvat credit by placing reliance on the decision of the Tribunal in the case of WOCO Motherson Elastomers Ltd. vs. CCE, Noida reported in 2008 (228) E.L.T. 107 (Tri. Delhi) =2008-TIOL-1046-CESTAT-DEL, wherein it had been held that transfer of cenvat credit availed on capital goods only, has been barred by the CBEC from being transferred to an EOU from a DTA Unit and not the credit availed in respect of the inputs.

In view of the foregoing discussions, he did not find any infirmity in the impugned order passed by the ld. Commissioner (Appeals), and thus, the appeal filed by the Revenue was dismissed.

Decision:- Appeal dismissed.

Comment:- The gist of the case is that if the tax has been paid to the government on any of the service even though the tax was not chargeable on the same the credit of such tax cannot be denied. If the tax has been deposited to the government treasury and department had not refunded the same then revenue cannot deny the benefit of credit available to the assessee. Here as the service tax was not payable on job work under the category of business auxiliary services but the tax was paid to the government by job worker mistakenly. The revenue department cannot deny the benefit of credit available to the assessee as assessment cannot be re-opened at the end of service reciever.

Prepared by:- Prayushi Jain

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PJ/CASE LAW/2016-17/3125

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