Whether service tax credit on job charges for grooving and manpower supply service for manufacturing of drills/tools admissible?

PJ/Case law/2013-14/1634

Case:- YG1 INDUSTRIES (INDIA) P.LTD. VERSUS COMMISSIONER OF C. EX., MUMBAI-III

Citation:-2013(30) S.T.R. 146 (Tri.-Mumbai)

Brief Facts:-The appeal and stay application are directed against the Order-in-Appeal ^.No. PKS/406/BEL/2010, dated 27-8-2010 passed by the Commissioner of Central Excise (Appeals), Mumbai Zone-II.

The appellant M/s. YG1 Industries (India) Pvt. Ltd. are manufacturers of drills/tools falling under Chapter 82 of the First Schedule to the Central Excise Tariff Act, 1985. The appellant availed Cenvat credit of Service Tax paid on various input services such as courier charges, internet, manpower supply, job-work for grooving, technical testing, labour for making punches, machinery reconditioning, consultancy, insurance, photocopier services, advertising, etc. The original Adjudicating Authority disallowed Cenvat credit totaling to Rs. 3,44,603/- against which the appellant filed an appeal before the Commissioner (Appeals). The lower Appellate Authority allowed Cenvat credit on various services such as courier charges, internet, labour for making punches, photocopier services, insurance service, advertising service, etc. and disallowed Cenvat credit on job-work charges for grooving and manpower supply services totaling to Rs. 1,70,951/-. Hence the appellant is before the Tribunal.

Appellant Contentions:-The appellant submitted that as regards the job-work charges for grooving on which Service Tax has been paid, the only ground for disallowing Cenvat credit is that the service provider was eligible for exemption under Notification No. 8/2005-S.T., dated 1-3-2005 and, therefore, he should not have paid any Service Tax and consequently the appellant should not have availed any credit. As regards the manpower supply services, the lower authorities held that from the invoices submitted by the appellant, the nexus between manufacture of final products and the manpower supply is not established. Accordingly, he disallowed Cenvat credit on these two services.

The advocate also relies on the decisions of this Tribunal in the case of Cipla Ltd. v. Commissioner of Customs & Central Excise, Pune-III, 2011 (273) E.L.T. 391 (Tri.-Mumbai); Multi Organics Pvt. Ltd. v. Commissioner of Central Excise, Nagpur, 2011 (21) S.T.R. 695 (Tri.-Mumbai) = 2010 (253) E.L.T. 804 (Tn. - Mumbai) and SPIC (1-ICD) Ltd. v. Commissioner of Central Excise, Chennai-I, 2006 (201) E.L.T. 386 (Tri.-Chennai) wherein it was held that once Service Tax has been paid by the service provider the authorities at the service recipient's end cannot dispute the assessment arid say that the service provider should have availed exemption and not discharged duty liability and on that ground Cenvat credit cannot be disallowed. With respect to the manpower supply service, the learned advocate has filed an affidavit wherein the service provider has stated that he has supplied semi-skilled and unskilled workers for working in the factory of the appellant during the period and also submitted a copy of the muster roll of the workers supplied by him and the charges paid to them.

Respondent Contentions:-The learned Dy. Commissioner (AR) reiterates the findings of the lower Appellate Authority.

Reasoning of Judgment:-We have considered the submission from both the parties and perused the record, we find that that the appeal itself can be disposed of at this stage as the issue lies in a narrow compass. Therefore, after granting waiver of pre-deposit of the dues adjudged, the appeal itself is taken up for consideration and disposal.
As regards the Service Tax paid on job charges for grooving it is not disputed that the service provider has paid the Service Tax. Whether he was entitled for exemption and was not required to pay duty at all should not be and cannot be a consideration for the jurisdictional officers at the appellant's end, who is only a service recipient. Once the Service Tax has been paid and service has been used in or in relation to the manufacture of the final products of the appellant, the appellant is rightly entitled to avail Cenvat credit. In the judgments cited supra, this position has been affirmed and re-confirmed on a number of occasions. Therefore, in respect of the Service Tax paid on job-work charges for grooving the appellant is rightly entitled for Cenvat credit of the Service Tax paid thereon.

Coming to the Service Tax paid on manpower supply service, Tribunal is of the view that if the manpower has been used in or in relation to the manufacture of the final products, the appellant is rightly entitled to avail Cenvat credit of the Service Tax paid thereon. The appellant has submitted an affidavit along with a copy of the muster roll before Tribunal in support of his claim that they have used the labour in or in relation to the manufacture of the final products. However, these documents were not shown or produced before the lower authorities and, therefore, it will be appropriate to remand this matter back to the original adjudicating authority to consider the claim of the appellant in this regard and on satisfaction of the same, allow the credit in respect of the manpower supply service.
In view of the above findings, the impugned order is set aside and remand the case back to the adjudicating authority for consideration afresh in respect of the manpower supply services. Needless to say that the appellant should be provided a reasonable opportunity of being heard to make their submissions in respect of the matter.

Decision:-The appeal is allowed by way of remand.

Comment:-The theme of this case is that appellant has paid service tax on job charges for grooving and manpower supply service for manufacturing of grooving and drills and also taken credit on same. The view of the lower authority is that Cenvat credit is not allowed as the service provider was eligible for exemption under Notification No. 8/2005-S.T. and,therefore, he should not have paid any Service Tax and consequently the appellant should not have availed any credit. This view is being opposed and rejected by the Tribunal on account of well settled principle of law that assessment cannot be challenged at the service recipient’s end.

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PJ/Case law/2013-14/1634

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