2011 (7) TMI 849 - HC - Service Tax

CENVAT credit can pay Service Tax on GTA services received by manufacturer, revenue appeals dismissed under CENVAT Rules

HC dismissed the revenue appeals and upheld the orders of the Commissioner (Appeals) and the Tribunal, holding that the assessee-manufacturer was legally ... Benefit of the CENVAT credit - Whether the manufacturer can take benefit of the CENVAT credit which it had obtained on the manufacturing side for discharging the Service Tax liability on account of Goods Transport Agency (GTA) services rendered - HELD THAT:- The case of the revenue is that the CENVAT credit could not be utilised for payment of CENVAT payable on services rendered and this should have been paid in cash. We find that the order of the Tribunal in Nahar Industrial Enterprises Ltd. [2007 (3) TMI 201 - CESTAT NEW DELHI] and other similar matters was challenged before the Punjab and Haryana High Court in [2010 (5) TMI 608 - PUNJAB AND HARYANA HIGH COURT], which decided a large number of appeals in favour of the Assessee. In the present case also, the Service Tax was paid out of the CENVAT credit on GTA services and hence, the Respondents were well within their right to utilise the CENVAT credit for the purpose of payment of Service Tax. The Commissioner (Appeals) as well as the Tribunal have rightly held that the Respondents were entitled to pay the Service Tax from the CENVAT credit. There is no force in the submission of the revenue that the CENVAT credit cannot be utilised for payment of Service Tax on GTA services. Accordingly, all the appeals are dismissed. Issues:Whether a person discharging Service Tax liability as a deemed service provider can utilize CENVAT credit for GTA servicesRs.Analysis:The core issue in this case was whether a person, not the actual service provider but discharging Service Tax liability on taxable services as a deemed service provider, could utilize CENVAT credit for Goods Transport Agency (GTA) services. The Tribunal had allowed the Assessee to use CENVAT credit for GTA services based on a previous decision in favor of the Assessee. The Revenue argued that CENVAT credit should not be used for services rendered and should be paid in cash. However, the Punjab and Haryana High Court, in a related matter, held that there was no legal prohibition on utilizing CENVAT credit for Service Tax on GTA services, as per CBEC's Excise Manual and Rule 3(4)(e) of the CENVAT Credit Rules, 2004. The Court affirmed the Assessee's right to pay Service Tax from CENVAT credit for GTA services, as upheld by the Commissioner (Appeals) and the Tribunal.The judgment emphasized that the Assessee, engaged in manufacturing, could indeed utilize CENVAT credit for payment of Service Tax on GTA services. The Court concurred with the reasoning of the Punjab and Haryana High Court, rejecting the Revenue's argument against using CENVAT credit for GTA services. It was concluded that the Assessee was within their rights to pay Service Tax from CENVAT credit for GTA services. Consequently, all appeals were dismissed, and no costs were awarded in the case.