Recipient liability under service tax law does not make a manufacturer an output service provider for Cenvat credit on motor vehicles.

A manufacturer liable to pay service tax on Goods Transport Agency service as recipient under section 68(2) of the Finance Act, 1994 is not thereby treated as the actual provider of output service for Cenvat credit purposes. Rule 2(r) of the Cenvat Credit Rules, 2004 includes such a person only for payment liability, not to confer an automatic right to credit. Credit on motor vehicles under rule 3 and the definition of capital goods is available only where the vehicles are used for providing the specified transport service. As the manufacturer was not shown to be providing GTA service or using the vehicles for that purpose, credit was denied.

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Issues: Whether a manufacturer who is liable to pay service tax on Goods Transport Agency service received, by virtue of section 68(2) of the Finance Act, 1994, can be treated as a provider of output service so as to avail Cenvat credit of duty paid on motor vehicles.

Analysis: Section 68(2) only shifts the liability to pay service tax on notified services to the recipient in prescribed cases. It does not deem such recipient to be the actual service provider. The definition of provider of taxable service in rule 2(r) of the Cenvat Credit Rules, 2004 includes a person liable to pay service tax, but that inclusion is confined to the purpose of payment and does not automatically confer entitlement to credit. Under rule 3 read with the definition of capital goods, credit on motor vehicles is available only where they are used for providing the specified goods transport service. The appellant was a manufacturer and was not shown to be providing Goods Transport Agency service or using the motor vehicles for that purpose.

Conclusion: The appellant was not entitled to Cenvat credit on motor vehicles, and the denial of credit was upheld.

Ratio Decidendi: Liability to pay service tax as a recipient under section 68(2) does not by itself make the recipient a provider of output service for the purpose of Cenvat credit, which remains available only when the statutory conditions for the relevant input or capital goods are satisfied.

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