Appellant Wins Appeal: Tribunal Grants Cenvat Credit, Affirms Job Workers Can Opt to Pay Service Tax Under Notifications

The Tribunal overturned the impugned order and allowed the appeal, entitling the appellant to cenvat credit. It determined that the job workers' payment of service tax was not exempt under the relevant notifications and was not illegal. The Tribunal emphasized that there is no mandatory requirement to avail service tax exemptions, allowing the job worker to choose to pay the tax. Since the jurisdictional officer did not contest the service tax payment, the cenvat credit claimed by the appellant could not be denied.

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Issues involved: Denial of cenvat credit of service tax paid by job workers on the ground of exemption under Notification No 08/2005-ST and 25/2012-ST.

Summary:
The appellant contended that the job workers paid service tax on input services without availing the applicable exemption. They argued that the assessment of service tax by job workers cannot be reopened by the department, and therefore, cenvat credit cannot be denied. They highlighted previous cases where similar issues were resolved in favor of the appellant. The Revenue reiterated the findings of the impugned order, denying cenvat credit based on the exemption notifications.

Upon review, the Tribunal found that the job worker's payment of service tax was not exempted under the mentioned notifications. They referred to Section 83 of the Finance Act, 1994, which applies certain provisions of the Central Excise Act to service tax matters. The Tribunal analyzed the provisions of Section 5A under Section 83, emphasizing that unlike central excise duty exemptions, there is no compulsory requirement to avail service tax exemptions. Therefore, the job worker had the option to pay the tax or avail the exemption, and their payment of service tax without exemption was not illegal.

Additionally, the Tribunal noted that if the jurisdictional officer of the service provider did not question the payment of service tax, the cenvat credit availed by the service recipient cannot be challenged. Consequently, the Tribunal concluded that the appellant was entitled to cenvat credit as the input services were directly used in the manufacture of their final product. The impugned order was set aside, and the appeal was allowed.

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