Tribunal grants service tax credit to cement manufacturer, rejecting denial based on quantity discrepancies.

The tribunal ruled in favor of the appellant, a cement manufacturer, allowing the appeal and granting consequential relief. The decision emphasized that the appellant was entitled to credit for service tax paid on the full value of coal received from washeries, despite processing losses. The judgment highlighted the applicability of service tax credit to the recipient and rejected the denial of credit based on quantity discrepancies. The tribunal's decision, delivered on 06/10/2016, resolved the issues of credit denial and quantity inconsistency in favor of the appellant.

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Issues Involved:
- Denial of proportionate credit of service tax paid on services provided by washeries
- Discrepancy in quantity of raw coal sent and received after washing
- Admissibility of Cenvat credit on the entire value of washed coal
- Applicability of service tax credit to the service recipient

Analysis:
1. The appellant, engaged in cement manufacturing, availed credit of taxes paid on coal and services used to bring coal to the factory. The coal required washing to remove impurities, done by job workers (washer) outside the factory, amounting to Business Auxiliary Services taxable under service tax.

2. Processing of raw coal in washeries led to a loss of quantity due to impurity removal, resulting in the appellant receiving less washed coal than raw coal sent. Invoices raised by washeries included service tax on the entire value, leading to a show cause notice proposing denial of proportionate credit due to quantity discrepancy.

3. The Commissioner confirmed a demand along with interest and penalty, citing that rejects retained by washeries affected the beneficiation rate, disallowing Cenvat credit related to the quantity discrepancy. The appeal contested this decision.

4. The tribunal found that the service tax was paid on the full value of coal received by the washeries, making the credit available to the appellant. Precedents were cited where credit was allowed despite wastage during processing, emphasizing that the appellant could have undertaken washing in their own factory to claim full credit.

5. Relying on legal principles and past judgments, the tribunal set aside the impugned order, allowing the appeal and granting consequential relief to the appellant. The decision emphasized that the service provider's tax payment entitles the service recipient to credit, rejecting the denial of credit based on processing losses.

6. The judgment, delivered on 06/10/2016, resolved the issues of credit denial and quantity discrepancy in favor of the appellant, highlighting the applicability of service tax credit to the recipient and the availability of full credit despite processing losses.

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