CENVAT credit may be used to pay service tax on GTA services when a manufacturer is treated as a deemed service provider.

CENVAT credit earned on manufacturing activities could be used to pay service tax on Goods Transport Agency services where the manufacturer was treated as a deemed service provider. The applicable credit rules allowed utilisation of CENVAT credit for payment of service tax on output services, and there was no legal bar to this adjustment. The Himachal Pradesh High Court accepted the view earlier taken in the connected Punjab and Haryana High Court line of cases and held that the utilisation of credit for GTA service tax was permissible, so the revenue challenge failed.

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Issues: Whether CENVAT credit availed on manufacturing activities could be utilised for payment of service tax on Goods Transport Agency services by a manufacturer treated as a deemed service provider under the service tax regime.

Analysis: The stated question was answered by applying the principle that there was no legal bar to using CENVAT credit for payment of service tax on GTA services. The relevant credit rules permitted utilisation of credit for payment of service tax on output services, and the view taken by the Punjab and Haryana High Court in the earlier connected line of cases was accepted as correctly laying down the position.

Conclusion: The utilisation of CENVAT credit for payment of service tax on GTA services was held to be permissible, and the revenue's challenge failed.

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