2010 (12) TMI 488 - AT - Service Tax

Cenvat credit of service tax - Input service - As per Rule 3(1) of the CENVAT Credit Rules 2004 credit of service tax paid on any input service received by the manufacturer of final product can be taken. In the present case the input service has been received by the job worker and not by the manufacturer of the final product - the provisions of the rules does not allow credit of Service tax paid on security services received by the job worker to be taken by the respondent-manufacturer - Hence the impugned order passed by the lower appellate authority cannot be sustained. Demand and interest - The Department had gone in appeal to the lower appellate authority against non-imposition of penalty - There was no appeal by the respondent-assessee before the lower appellate authority - Since department wrongly set aside the demand and interest - Accordingly the impugned order-in-appeal is set aside and the matter is remanded the lower appellate authority to consider the department s appeal afresh.

Issues:
Claim of credit of service tax paid on security services by the manufacturer for job worker's premises.

Analysis:
The judgment by the Appellate Tribunal CESTAT, Chennai dealt with the issue of claiming credit of service tax paid on security services by the manufacturer for the job worker's premises. The Tribunal noted that as per Rule 3(1) of the CENVAT Credit Rules, 2004, credit of service tax paid on any input service received by the manufacturer of the final product can be taken. However, in this case, it was observed that the input service had been received by the job worker and not by the manufacturer of the final product. Therefore, the Tribunal concluded that the provisions of the rules did not allow the credit of service tax paid on security services received by the job worker to be taken by the manufacturer. Consequently, the impugned order passed by the lower appellate authority was deemed unsustainable.

Moreover, the Tribunal highlighted that despite the Department appealing to the lower appellate authority against the non-imposition of penalty, there was no appeal by the respondent-assessee before the lower appellate authority. The Tribunal found that the lower appellate authority had wrongly set aside the demand and interest in the case. Due to this error, the impugned order-in-appeal was deemed unsustainable on this ground as well. Therefore, the Tribunal set aside the impugned order-in-appeal and remanded the matter to the lower appellate authority to reconsider the department's appeal regarding the imposition of penalty, ensuring both sides are given an adequate opportunity of hearing. Consequently, the Department's appeal was allowed by way of remand, providing a clear direction for further proceedings in the case.

In conclusion, the judgment provided a detailed analysis of the issues surrounding the claim of credit of service tax paid on security services by the manufacturer for the job worker's premises. It emphasized the importance of adhering to the provisions of the CENVAT Credit Rules, 2004 and ensuring a fair opportunity of hearing in matters related to the imposition of penalties. The decision by the Appellate Tribunal CESTAT, Chennai underscored the significance of following legal procedures and rules while addressing tax-related disputes and appeals.

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