Cenvat credit for GTA tax liability as output service was available for the pre-19-4-2006 period.

For the period before 19-4-2006, Rule 2(p) of the Cenvat Credit Rules, 2004 contained an explanation deeming the service on which a person was liable to pay tax as an output service where that person did not provide any taxable service or manufacture final products. On that basis, a manufacturer liable as recipient of Goods Transport Agency service could treat the service as output service and use Cenvat credit to discharge the tax. The explanation was omitted only from 19-4-2006, so the pre-amendment position continued to apply for the relevant period. A reference to a Larger Bench in another matter did not alter that settled view.

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Issues: Whether, for the period prior to 19-4-2006, a manufacturer liable to pay service tax on Goods Transport Agency services as recipient could treat such service as output service and utilise Cenvat credit for payment of that tax.

Analysis: The relevant definition of "output service" under Rule 2(p) of the Cenvat Credit Rules, 2004 then contained an explanation creating a deeming fiction that, where a person liable to pay service tax did not provide any taxable service or manufacture final products, the service for which he was liable to pay tax would be deemed to be output service. That explanation was omitted only by Notification No. 8/2006-C.E. (N.T.) dated 19-4-2006. For the period in dispute, the Tribunal followed the consistent line of decisions recognising the benefit of that explanation and held that the assessee, though paying service tax as recipient of GTA services, was entitled to utilise Cenvat credit. The reference to a Larger Bench in another matter did not concern the substantive issue itself, and therefore did not displace the existing view.

Conclusion: The assessee was entitled to utilise Cenvat credit for payment of service tax on GTA services for the relevant period prior to 19-4-2006.

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