Cenvat credit can discharge service tax liability, and interest cannot be sustained when payment is made through credit.
Cenvat credit was held usable for payment of service tax on an output service, following the Tribunal's earlier precedent that such utilisation is not barred merely because the liability is service tax. The declaration concerning non-availment of the benefit of Notification No. 12/03-S.T. was not finally decided and was remitted for verification by the adjudicating authority, which was directed to examine its contents and pass orders according to law. On the interest issue, the Tribunal held that no interest could be levied where the tax was paid from the Cenvat credit account, and the interest demand was set aside.
Issues: (i) Whether Cenvat credit could be utilised for payment of service tax on output service; (ii) whether the case relating to the declaration regarding non-availment of the benefit of Notification No. 12/03-S.T. required remand for verification; (iii) whether interest was leviable when the tax was paid from the Cenvat credit account.
Issue (i): Whether Cenvat credit could be utilised for payment of service tax on output service.
Analysis: The Tribunal applied its earlier view that utilisation of Cenvat credit for payment of service tax on any output service is permissible. The reasoning followed the line of precedent that such utilisation is not barred merely because the tax relates to service tax liability.
Conclusion: Yes. Utilisation of Cenvat credit for payment of service tax on output service was held permissible.
Issue (ii): Whether the case relating to the declaration regarding non-availment of the benefit of Notification No. 12/03-S.T. required remand for verification.
Analysis: The declaration was stated to be available but had not been produced before the authorities below. The Tribunal accepted the request to allow the declaration to be examined at the adjudication stage and directed the adjudicating authority to verify its contents and pass orders in accordance with law.
Conclusion: The matter was remitted to the adjudicating authority for consideration of the declaration.
Issue (iii): Whether interest was leviable when the tax was paid from the Cenvat credit account.
Analysis: In view of the permissibility of payment through Cenvat credit, the Tribunal accepted the contention that interest could not be levied on that footing and set aside the interest demand.
Conclusion: No. The interest demand was set aside.
Final Conclusion: The appeal succeeded on the question of interest and the credit-utilisation issue, while the declaration-related aspect was sent back for fresh adjudication, leaving the matter only partly concluded at this stage.
Ratio Decidendi: Cenvat credit may be utilised to discharge service tax on output service, and where the tax payment is otherwise permissible, interest cannot be sustained on that basis; unresolved factual verification may be remanded for adjudication.
TaxTMI 
AI Drafter ✕
TaxTMI 
