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CX – Credit of duty on Inputs used in repair activity is to be allowed since assessee is discharging service tax liability: CESTAT

2019-TIOL-2498-CESTAT-AHM

IN THE CUSTOMS EXCISE AND SERVICE TAX APPELLATE TRIBUNAL
WEST ZONAL BENCH, AHMEDABAD

Appeal Nos. E/70/2011, ST/526/2011-DB

Arising out of OIO No. SKSS/229/VAPI/2010, Dated: 30.09.2010 and OIA no. SA/72/VAPI/2011, Dated: 21.06.2011
Passed by Commissioner of Central Excise-VAPI

Date of Hearing: 05.02.2019
Date of Decision: 01.03.2019

GEMINI ENGI FAB LTD

Vs

COMMISSIONER OF CENTRAL EXCISE AND SERVICE TAX
VAPI

Appellant Rep by: Shri V S Sejpal, CA
Respondent Rep by: Shri S N Gohil, Supdt. AR

CORAM: Ramesh Nair, Member (J)
Raju, Member (T)

CX – The assessee is registered with Service Tax for providing services of “Repair and Maintenance Services” and “Erection Commissioning and Installation Services” – They are manufacturing dutiable goods – Appeal no. E/70/2011 seeks to deny CENVAT Credit whereas appeal no. ST/526/2011 seeks to demand duty against utilization of said CENVAT Credit – In so far as appeal no. ST/526/2011 is concerned, the demand has been confirmed solely on the ground that the assessee should not have utilized the credit till the dispute regarding availability of credit is finalized – Irrespective of the facts whether the credit is allowed or denied, the second demand amounts to double jeopardy, hence, is not sustainable and is therefore, set aside – Now coming to appeal E/70/2011, it is seen that Revenue is seeking to deny credit of Excise duty paid during processing of certain goods by job work items at the hands of job workers providing services to the assessee – There is no dispute that the said material is used in provision of services on which the assessee is paying Service Tax – The SCN seeks to deny credit on the ground that the activity undertaken by assessee is not manufacturing but repair of goods and thus, no credit on input can be allowed – It ignores the fact that the assessee is also a service provider and said goods are used in provision of said services in which the assessee is discharging Service Tax liability – No merit found in denial of CENVAT credit to the assessee: CESTAT

Appeal allowed

FINAL ORDER NOS. A/10406-10407/2019

Per: Raju:

These appeals have been filed by M/s Gemini Engi Fab Ltd. against confirmation of demand of Service Tax, interest and imposition of penalty under section 76 of the Finance Act, 1994.

2. Ld. Counsel for the appellant pointed out that the appellant are registered with Service Tax for providing services of “Repair and Maintenance Services” and “Erection Commissioning and Installation Services”. The appellants are manufacturing dutiable goods. He pointed out that the appellant was allotted order for carrying out repair and Re-salvaging of Two(2) Ammonia Super Heater from Heavy Water Board in the Dept. of Atomic Energy, Govt. of India. The said machines were received by the appellant who carried out repairing of super Heaters as per work order and the same was returned under appropriate challan and Service Tax Invoices on proper payment of appropriate Service Tax on the said goods. The appellant had sent a part of the said Super heater namely, Inconel Tubes for de-finning and finning and for Solution annealing to outside the Job Work on Job Work Basis on the cover of Annexure-II Challans under CENVAT Rule 4(5)(a) read with Notification 214/86(NT). The said tubes were returned for job work under job work challans. Thereafter, the said material was sent for solution annealing to another job worker under job work challans and the same were returned to the appellant under job work challan. Revenue is seeking to deny CENVAT Credit on the Excise Duty paid by Jord Engineering India Ltd. for the de-finning done by them on job work basis on the ground that the goods namely Ammonia Super Heater were received for repair and maintenance and the said process did not amount to manufacture. Ld. Counsel argued that the assessing officer of the appellant cannot question the assessment done by the assessing officer at the job worker’s end. He pointed out that since the appellants are paying service tax, they are entitled to take credit of the Excise Duty and Service Tax paid for completion of these services. He pointed out that use of the said material on which Central Excise duty was paid during the provision of the services by the appellant has not been questioned. He argued that in these circumstances, the benefit of CENVAT Credit cannot be denied.

2.1 He further pointed out that since the credit on this quantum has been denied, a separate Show Cause Letter was issued, demanding duty in respect of utilization of the said credit. He pointed out that it amounts to double jeopardy as on one end, Revenue is seeking reversal of Cenvat Credit and simultaneously it is demanding duty against the use of said credit.

3. Ld. AR relies on the impugned order.

4. We have gone through rival submissions. We find that appeal no. E/70/2011 seeks to deny CENVAT Credit whereas appeal no. ST/526/2011 seeks to demand duty against utilization of the said CENVAT Credit. In so far as appeal no. ST/526/2011 is concerned, the demand has been confirmed solely on the ground that the appellant should not have utilized the credit till the dispute regarding availability of credit is finalized. I find that irrespective of the facts whether the credit is allowed of denied, the second demand amounts to double jeopardy, hence, is not sustainable and is therefore, set aside. Appeal is allowed in appeal no. ST/526/2011.

4.1 Now coming to appeal E/70/2011, it is seen that Revenue is seeking to deny credit of Excise duty paid during processing of certain goods by job work items at the hands of job workers providing services to the appellant. There is no dispute that the said material is used in provision of the services on which the appellants are paying Service Tax. The Show Cause Notice seeks to deny the credit on the ground that the activity undertaken by the appellant is not manufacturing but repair of goods and thus, no credit on input can be allowed. It ignores the fact that the appellants are also a service provider and said goods are used in provision of said services in which the appellants are discharging the Service Tax liability. In these circumstances, we do not find any merit in denial of CENVAT credit to the appellants. The appeal no. E/70/2011 is also allowed.

(Pronounced in the open Court on 01.03.2019)

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