Gandhi Special Tubes Limited Vs C.C.E. & S.T.-Vadodara-ii (CESTAT Ahmedabad)
Summary: Gandhi Special Tubes Limited challenged the denial of CENVAT credit on service tax paid by its job workers. The Department maintained that the job-work activities were exempt under Notification Nos. 08/2005-ST and 25/2012-ST and that the job workers should not have paid service tax. Consequently, it considered the credit claimed by the appellant inadmissible. The appellant argued that the services were eligible input services, the job workers had deposited the tax with the Central Government, and the Department could not reopen the service providers’ tax treatment through proceedings against the recipient.
The appellant also referred to earlier proceedings involving duty-paid inputs where the Department had questioned the credit because the supplier’s activity allegedly did not amount to manufacture. Those proceedings had been dropped. It further submitted that, in subsequent proceedings involving the same issue, the Commissioner (Appeals) and Additional Commissioner had decided in its favour and the Revenue had accepted those orders.
The Tribunal examined Section 83 of the Finance Act, 1994, which makes specified provisions of the Central Excise Act, 1944 applicable to service tax. It observed that only Section 5A(2A), and not Section 5A(1A), was incorporated. While Section 5A(1A) prohibits payment of excise duty where an absolute exemption applies, the Finance Act, 1994 contained no equivalent compulsory-exemption provision for service tax. Accordingly, the job workers could either claim the exemptions or pay service tax.
The Tribunal further held that the job-work services were directly used in or in relation to manufacture of the appellant’s final products. Even independently of the optional nature of the exemption, the recipient’s CENVAT credit could not be questioned when the service providers’ tax payments and assessments had not been challenged by their jurisdictional officers. The Tribunal therefore set aside the impugned order and allowed the appeal.
FULL TEXT OF THE ORDER OF CESTAT AHMEDABAD
The issue involved in the present appeal is denial of cenvat credit of service tax paid by the job workers on the ground that the job worker should not have paid the service tax and they ought to have availed the exemption under Notification No 08/2005-ST and 25/2012-ST
2. Shri D R Bhatt, Learned Chartered Accountant appearing on behalf of the appellant submits that the services on which the job worker have paid the service tax are input services on which the job worker have paid the service tax without availing exemption applicable to them. In such a situation the assessment of service tax of Job workers cannot be reopened at appelalnt’s end by the department and hence the cenvat credit availed on service tax paid by the job worker cannot be denied on that ground.
2.1 He submits that there is no dispute that the service provided by the job workers are the input services on that the job workers have deposited the tax to the credit of the Central Government. The appellant is entitled and has rightly availed the cenvat credit of the service tax by the job worker.
2.2 He submits that in the appellant’s own case involving the identical issue, it was raised by the department with respect to the inputs purchased by the appellant i.e. drawn wires from rod from input supplier on which the input supplier had paid the central excise duty and the appellant has availed the cenvat credit of excise duty paid on those inputs i.e. drawn wire. The department had issued the show cause notice proposing to recover wrongly availed cenvat credit of the duty paid on the ground that the process of drawing wire from the rod does not amount to manufacture and therefore, input supplier has wrongly paid the duty which he ought not to have paid. In that case the proceedings were dropped and the cenvat credit was allowed. Following the same in the present case also cenvat credit cannot be denied even though the job worker has paid the service tax wrongly. He submits that in the appellant own case for the subsequent period, the Learned Commissioner (Appeals) held in the favour of the appellant and for the subsequent period also the Additional Commissioner following the Commissioner (Appeals) order dated 09.11.2014 dropped the proceeding and the Revenue has accepted both the orders. Accordingly, the issue attained finality in the favour of the appellant.
3. Shri Rajesh R Kurup, Learned Counsel appearing on behalf of the Revenue reiterates the finding of the impugned order.
4. We have carefully considered the submission made by both sides and perused the records. We find that the Revenue has denied the Cenvat Credit on the service tax paid by the job worker on the job work on the ground that the said job work activity was exempted from payment of service tax under Notification No. 08/2005-ST and Notification No. 25/2012-ST. Accordingly, the job worker was not supposed to pay the service tax, therefore, the service tax paid by the job worker is not available as cenvat credit to the appellant. The important aspect in this case is that whether the job worker has option to pay the service tax or compulsorily avail the exemption Notification No 08/2005 and 25/2012. In this regard, we would like to refer Section 83 of the Finance Act, 1994 whereby certain sections of Central Excise Act have been made applicable in the matter of service tax. The Section 83 is reproduced below:-
“SECTION 83. Application of certain provisions of Act 1 of 1944.— The provisions of the following sections of the Central Excise Act, 1944, as in force from time to time, shall apply, so far as may be, in relation to service tax as they apply in relation to a duty of excise :- sub-section (2A) of section 5A, sub-section(2) of section 9A, 9AA, 9B, 9C, 9D, 9E, 11B, 11BB, 11C, 12, 12A, 12B, 12C, 12D, 12E, 14, 15, 15A, 15B, 31, 32, 32A to 32P, 33A, 35EE, 34A, 35F, 35FF, to 35O (both inclusive), 35Q, 35R, 36, 36A, 36B, 37A, 37B, 37C, 37D, 38A and 40”
4.1 As per the above Section 83 under Section 5A only subsection (2A) of Central Excise Act is applicable. For ease of reference Section 5A is reproduced below:-
“[5A. Power to grant exemption from duty of excise.–(1) If the Central Government is satisfied that it is necessary in the public interest so to do, it may, by notification in the Official Gazette, exempt generally either absolutely or subject to such conditions (to be fulfilled before or after removal) as may be specified in the notification, excisable goods of any specified description from the whole or any part of the duty of excise leviable thereon:
Provided that, unless specifically provided in such notification, no exemption therein shall apply to excisable goods which are produced or manufactured–
(i) in a 2[free trade zone 3[* * *]] and brought to any other place in India; or
(ii) by a hundred per cent export-oriented undertaking and 4[rought to any other place in India].
Explanation.–In this proviso, 2[“free trade zone” 5[* * *] and hundred per cent export-oriented undertaking” shall have the same meanings as in Explanation 2 to sub-section (1) of Section 3.
6 [(1A) For the removal of doubts, it is hereby declared that where an exemption under sub-section (1) in respect of any excisable goods from the whole of the duty of excise leviable thereon has been granted absolutely, the manufacturer of such excisable goods shall not pay the duty of excise on such goods.]
7 [(2) If the Central Government is satisfied that it is necessary in the public interest so to do, it may, by special order in each case, exempt from the payment of duty of excise, under circumstances of an exceptional nature to be stated in such order, any excisable goods on which duty of excise is leviable.]
8 [(2A) The Central Government may, if it considers it necessary or expedient so to do for the purpose of clarifying the scope or applicability of any notification issued under sub-section (1) or order issued under sub-section (2), insert an explanation in such notification or order, as the case may be, by notification in the Official Gazette at any time within one year of issue of the notification under sub-section (1) or order under sub-section (2), and every such explanation shall have effect as if it had always been the part of the first notification or order, as the case may be.]
(3) An exemption under sub-section (1) or sub-section (2) in respect of any excisable goods from any part of the duty of excise leviable thereon (the duty of excise leviable thereon being hereinafter referred to as the statutory duty) may be granted by providing for the levy of a duty on such goods at a rate expressed in a form or method different from the form or method in which the statutory duty is leviable and any exemption granted in relation to any excisable goods in the manner provided in this sub-section shall have effect subject to the condition that the duty of excise chargeable on such goods shall in no case exceed the statutory duty.
Explanation.– “Form or method”, in relation to a rate of duty of excise means the basis, namely, valuation, weight, number, length, area, volume or other measure with reference to which the duty is leviable.
(4) Every notification issued under sub-rule (1), and every order made under sub-rule (2), of Rule 8 of the Central Excise Rules, 1944, and in force immediately before the commencement of the Customs and Central Excises Laws (Amendment) Act, 1988 shall be deemed to have been issued or made under the provisions of this section and shall continue to have the same force and effect after such commencement until it is amended, varied, rescinded or superseded under the provisions of this section.]
9 [(5) Every notification issued under sub-section (1) or sub-section (2-A) shall, unless otherwise provided, come into force on the date of its issue by the Central Government for publication in the Official Gazette.]
(6) 10[* * *ic9533]”
4.2 In terms of subsection (1A) of Section 5A for the purpose of central excise if an exemption is granted absolutely the manufacturer of excisable goods shall not have option to pay excise duty whereas the Notification necessarily to be availed by the assesse. Unlike sub section (1A) of Section 5A, there is no provision in the Finance Act, 1994 to compulsorily avail the exemption granted absolutely. Therefore, Notification No. 08/2005-ST and 25/2012-ST even though they grant absolute exemption but in absence of provision such as Sub section (1A) of Section 5A of Finance Act, 1994 the assessee has option either to pay service tax or to avail the exemption. Therefore, when the job worker has paid the tax without availing the exemption Notification (Supra) there is no illegality in payment of such service tax. If this be so, then the service recipient, in the present case, the appellant are legally entitled to avail the cenvat credit as there is no dispute that the input services is directly used in or in relation to manufacture of their final product.
4.3 Without prejudice, we also find that even though the service provider paid the service tax which was otherwise not payable but the payment of service tax and its assessment was not questioned by the jurisdictional officer of service provider then also the credit availement by the service recipient cannot be questioned. Therefore, we do not find anything illegal or wrong on the part of the appellant in availing the cenvat credit on the input services provided by the job worker to the appellant. Hence, the impugned order is not sustainable.
5. Accordingly, we set aside the impugned order. Appeal is allowed.
(Pronounced in the open court on 11.10.2023 )
