CENVAT credit on taxed job work remains admissible where the job worker chooses to pay service tax and documents comply.

CENVAT credit on service tax paid for job work cannot be denied merely because the job work activity was eligible for exemption under Notification No. 8/2005-ST. The notification was treated as giving the job worker an option either to claim exemption or to pay service tax. Where the job worker elected to pay tax and the levy was reflected through valid invoice or challan documents under the CENVAT scheme, the credit remained admissible. The fact that the underlying activity could have been exempt did not, by itself, defeat credit when tax was actually paid and properly documented.

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Issues: Whether CENVAT credit of service tax paid on job work could be denied on the ground that the job work activity was exempt under Notification No. 8/2005-ST dated 01.03.2005.

Analysis: The respondent manufactured iron and steel products falling under Chapter 72 of the Central Excise Tariff Act, 1985 and availed credit on the basis of invoice/challan issued by the job worker. Notification No. 8/2005-ST dated 01.03.2005 was held to confer an option on the job worker either to claim exemption or to pay service tax on the job work activity. Since the job worker chose to pay service tax and the tax was passed on through valid documents prescribed under the CENVAT credit scheme, the credit could not be denied merely because the activity was capable of exemption.

Conclusion: The CENVAT credit was admissible and the Revenue's challenge failed.

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