Cenvat credit entitlement upheld where supplier discharged service tax and its jurisdiction accepted payment, allowing recipient credit.

Appellant was held entitled to Cenvat credit for input services used in manufacture because the supplier had discharged service tax and that payment was accepted by the supplier's jurisdictional authority; consequently the recipient cannot be deprived of credit on the basis of re classification or non taxability as asserted by a different territorial assessing officer. The analysis emphasises the legal effect of supplier tax payment and its acceptance, the characterisation of services as input services, and limits on reassessment by the recipient's jurisdictional officer; the denial of credit was set aside with consequential relief.

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Issues: Whether the appellant is entitled to Cenvat credit of Rs. 3,99,183/- on input services received from a job worker where the service provider had paid service tax (although the service was placed in the negative list) and such payment was accepted by the supplier's jurisdictional authority.

Analysis: The appeal examines whether denial of Cenvat credit to the recipient can be sustained when the supplier had paid service tax which was neither disputed nor refunded by the supplier's jurisdictional authority, and when the services received were used as input services in manufacture. Applicable provisions include the Cenvat Credit Rules, 2004 and the relevant provisions of the Finance Act, 1994 concerning taxable services and the negative list. The Tribunal applied settled precedents holding that where the supplier has discharged tax obligations and the supplier's jurisdictional authority has accepted that payment, the recipient cannot be deprived of credit on the ground of re-classification or non-taxability by a different territorial assessing officer. The analysis focuses on (a) the nature of services received as input services for manufacture, (b) the effect of tax payment by the supplier and its acceptance by the supplier's jurisdiction, and (c) limits on reassessment by the recipient's jurisdictional officer concerning the supplier's tax liability.

Conclusion: The denial of Cenvat credit of Rs. 3,99,183/- is set aside and the appellant is entitled to the Cenvat credit with consequential relief.

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