1. Heard both sides.
2. This is an appeal filed against the order-in-appeal No. CCESA-SRT/(APPEALS)/PS-71/2017-18 dated 30.10.2017 passed by Commissioner (Appeals), CGST & Central Excise-Surat.
3. Briefly stated facts of the case are that the appellant are engaged in the manufacture of excisable goods falling under Chapter 30 of the Central Excise Tariff Act, 1984. They had availed CENVAT credit of service tax paid by the service provider in relation to the input service viz. Man-power supply service which were used in or in relation to the manufacture of finished goods in the factory during the period July 2012 to March 2014. Alleging that as per Notification 30/2012-ST dated 20.06.2012, the appellant was required to pay 75% of the Service tax amount as service recipient whereas, the service provider was required to pay 25% of the service tax liability, instead, since the service provider had paid the entire service tax amount(100%), therefore, the appellant are not eligible to avail credit of the service tax paid by the service provider, consequently, demand notice was issued for recovery of the credit with interest and penalty. On adjudication, the demand was confirmed with interest and penalty. The appellant thereafter filed an appeal before Ld. Commissioner (Appeals) who in turn, rejected their appeal. Hence the present appeal.
4. Ld. Advocate for the appellant submits that they have availed credit of the service tax paid against the invoices issued by the service provider and hence it is immaterial whether the entire amount of service tax was paid by service tax provider or by the appellant while availing the credit on the same. He submits that the amount of service tax paid by the service provider cannot be considered as a deposit as held by authorities below in considering the eligibility of credit in view of the judgment of the Hon'ble Gujarat High Court in the case of Commissioner of Central Excise Ahmedabad - III v. Nahar Granites Ltd : 2014 (305) ELT 9 (Guj.) It is his contention that once the service tax was paid and the invoices issued indicating the payment of such service tax, the appellant are eligible to take credit of the service tax paid as the said services are used in or in relation to manufacture of finished goods. Also he has referred to the judgment of this Tribunal on similar issue in the case of Sunil Steels v. CCE : 2017 (48) STR 268 (Tri-Del.).
5. He has vehemently argued that the service tax liability apportioned in the aforesaid Notification 30/2012-ST dated 20.06.2012 between the service provider and the service receiver has nothing to do with availing/eligibility of credit by the service recipient. Further, referring to the amended Rule 4(7) of the Cenvat Credit Rules, 2004, the Ld. Advocate has submitted that the proviso itself prescribes the condition to avail credit of the service tax paid on reverse charge mechanism mentioning that only after the service tax amount paid or payable is indicated in an invoice or bill in accordance with Rule 9 of the Cenvat Credit Rules, 2004, then only credit could be admissible. Since in the present case, the entire amount of service tax paid has been indicated in the invoice, therefore, they are eligible to take credit of the service tax paid.
6. I find that the appellant though required to pay 75% of the service tax liability, on receiving the man-power supply service from the service provider, however, initially the entire amount of service tax was paid by the service provider and later recovered from the appellant by indicating the same in the invoice. I find that the amount which the service provider paid whether to be consider as a deposit or service tax for deciding the eligibility of credit has been more or less settled by the Hon'ble Gujarat High Court in Nahar Granites Ltd. (supra), their lordships observed as under:
7. Rule 3 of the Cenvat Credit Rules, 2004 allows a manufacturer or producer of final product or a provider of taxable service to take Cenvat credit of the duty of excise specified in the First Scheduler to the Excise Tariff Act. Rule 4 of the Cenvat Credit Rules, 2004 lays down the conditions for allowing Cenvat credit. Sub-rule (1) thereof provides that Cenvat credit in respect of inputs may be taken immediately on receipt of the inputs in the factory of the manufacturer or in the premises of the provider of output service. Proviso to sub-rule (1) puts certain limitations on such immediate availability of Cenvat credit. We are however, not concerned with the proviso.
8. In terms of Rules 3 and 4 of the Cenvat Credit Rules, 2004, a manufacturer would be entitled to avail the Cenvat credit in respect of the inputs used for the manufacture of a final product or in providing taxable service of the excise duty specified in First Schedule to the Excise Tariff Act. Insofar as the respondent is concerned, he had purchased the inputs and utilised the same for manufacture of a final product. Such goods were duty paid. Rules 3 and 4 of the Cenvat Credit Rules, 2004, thus would enable him to avail the Cenvat credit. It is a different thing that the supplier of the goods to the respondent paid excise duty on such product under mistaken belief. In law as declared by the Supreme Court in case of Collector of Central Excise, Patna v. Tata Iron and Steel Co. Ltd. (supra), no duty was payable on such product. Strictly speaking therefore, such amount deposited by the original manufacturer would not partake the character of excise duty. However, when the department did not dispute the classification of such manufacturer, accepted the declarations and duties, Cenvat credit on such duty cannot be declined to the purchaser of the goods who otherwise fulfilled all conditions to availing Cenvat credit thereof.
9. Case is substantially similar to one before the Supreme Court in case of MDS Switchgear Ltd. (supra). In the said case, the Tribunal while accepting the department's allegation of inflation of the value of intermediate goods to load the assessable value, observed that if the department was of the opinion that the value of the final product was depressed, it could have charged the original manufacturer unit in under-invoicing their product. This was however, not done. Valuation was duly approved and the payment of duty was also accepted. The Tribunal further observed that We find absolutel
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y no substance in the attempt of the learned Commissioner to convert a part of the duty so paid into deposit of duty. There is no legal basis for such presumption. The rules entitled the receipt manufacturer to avail of the benefit of the duty paid by the supplier manufacturer. A quantum of duty already determined by the jurisdictional officers of the supplier unit cannot be contested or challenged by the officers in charge of recipient unit. 7. In view of the above principle of law and applying the same to the facts and circumstances of the case, I do not fine any merit in the impugned order. Consequently, the same is set aside and the appeal is allowed with consequential relief, if any, as per law.