Whether service tax credit on job work deniable on ground that no service tax was payable?

PJ/CASE LAW/2015-16/2890

Case:-UNITECH MACHINES LTD. VERSUS COMMISSIONER OF C. EX. & S.T., MEERUT-I

Citation:- 2015 (40) S.T.R. 499 (Tri. - Del.)

Brief Facts:-The appellant is in appeal against the impugned order wherein refund claim of the appellant has been rejected by both the lower authorities. The facts of the case are that the appellant is manufacturer of motor vehicle parts and sending their semi-finished goods for electroplating to the job worker following Rule 4(5)(a) of the Cenvat Credit Rules, 2004. The job worker is paying Service Tax for their activity under the category of business auxiliary services. Service Tax paid by the job worker has claimed Cenvat credit by the appellant. During the course of the audit an objection was raised. The appellant reversed Cenvat credit on job charges. Later on filed the refund claim which was rejected by both the authorities. Therefore, appellant is before Tribunal in appeal.

Appellants Contention:-The ld. counsel for the appellant submits that in this case there is no dispute that service provider, i.e., job worker has paid Service Tax and on the said invoices appellant has taken the credit. Moreover, the Service Tax paid by the job worker has been accepted by the department and it was not disputed that job worker is not required to pay Service Tax. Whatever Service Tax paid by the appellant to the job worker is entitled for Cenvat credit. Therefore, their refund claim is admissible. To support his contention he submits that when the payment of Service Tax has not been disputed by the department at the end of the service provider and same cannot be disputed at the end of service receiver. Therefore, impugned order is to be set aside.

Respondents Contention:-On the other hand, ld. AR submits that the job worker was not required to pay Service Tax as in one of the job worker it was held by the adjudicating authority that job worker is not required to pay Service Tax on job work goods. When the job worker is not required to pay Service Tax, therefore, appellant is not entitled to take Cenvat credit.

Reasoning of Judgement:-Heard the parties. Considered the submissions. In this case it is not disputed by the Revenue at the end of job worker that they are not required to pay Service Tax. It is also not in dispute that the job worker has not paid the Service Tax. In these circumstances, whatever Service Tax has been paid by the appellant to the job worker, appellant is entitled to take Cenvat credit. Consequently, the appellant was not required to reverse the same. On objection by the audit party, the appellant has reversed the Cenvat credit, so they are entitled to take refund on the same. With these terms, tribunal hold that appellant is entitled to claim refund of Service Tax reversed by them paid on job work charges. Consequently, impugned order is set aside. Appeal is allowed with consequential relief, if any.

Decision:-Appeal allowed.

Comment:- The gist of the case is that when the revenue department has not objected payment of service tax by the job worker, the revenue department cannot deny the cenvat credit of the same at the recipient’s end. Although, no service tax was payable on the job work charges but if service tax has been paid, its cenvat credit to the service receiver cannot be denied.

Prepared By:- Neelam Jain

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PJ/CASE LAW/2015-16/2890

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