2012 (12) TMI 32 - AT - Service Tax

Appeal partially allowed: Service Tax credit pre-1.3.2008 justified, Cenvat credit post-1.3.2008 denied. Penalties overturned.

The judgment allowed the appeal partially, holding the denial of Service Tax credit before 1.3.2008 unjustified but upholding the denial of Cenvat credit ... Cenvat credit on the GTA services - denial of claim as per Notification No. 10/08 CE (NT) dated 1.3.08 - Held that:- As decided in M/s. Shree Rajasthan Syntex Ltd. & Others Versus CCE Jaipur [2011 (8) TMI 265 - CESTAT, NEW DELHI] amendment effected from 18.4.06 vide which the explanation to Rule 2p of the CCR was deleted has not effected the assessees entitlement to avail the Cenvat credit. However, with effect from 1.3.08, with the issuance of Notification No. 10/08-CE(NT), the appellants were not entitled to avail the credit inasmuch as GTA services were specifically excluded the definition of output services. Denial of Service Tax credit for the period prior to 1.3.2008 is not justified and denial of Cenvat credit for the period after 1.3.2008 is to be upheld - set aside the penalties imposed on the appellants as it cannot be held to be a case of any malafide - partly in favour of assessee. Issues:- Entitlement to Cenvat credit on GTA services- Effect of Rule 2p explanation withdrawal- Impact of Notification No. 10/08 CE (NT) on GTA services exclusion- Imposition of penalties under Rule 15A of Cenvat Credit RulesEntitlement to Cenvat credit on GTA services:The judgment addressed the issue of whether the appellants were entitled to avail the Cenvat credit of Service Tax paid on GTA services received by them. The Tribunal referred to a previous case, Shree Rajasthan Syntax Ltd., where it was held that the deletion of the explanation to Rule 2p did not affect the assessee's entitlement to avail the Cenvat credit. Thus, the Tribunal concluded that the appellant was entitled to avail the credit even after 18.4.06. However, the issuance of Notification No. 10/08-CE(NT) on 1.3.08 specifically excluded GTA services from the definition of output services, leading to the denial of credit from that date onwards.Effect of Rule 2p explanation withdrawal:The Revenue initiated proceedings for the denial of credit, contending that the appellants were not entitled to avail the Cenvat credit from 18.4.06 when the explanation under Rule 2p was withdrawn. The impugned order confirmed the demand and imposed penalties based on this contention. However, the Tribunal's interpretation in the present case clarified that the withdrawal of the explanation did not impact the appellant's entitlement to avail the credit.Impact of Notification No. 10/08 CE (NT) on GTA services exclusion:The issuance of Notification No. 10/08-CE(NT) on 1.3.08 specifically excluded GTA services from the definition of outdoor services. This exclusion led to the denial of Cenvat credit for the period after 1.3.08. The Tribunal upheld this denial based on the notification's provisions, which impacted the appellants' ability to avail the credit.Imposition of penalties under Rule 15A of Cenvat Credit Rules:Regarding the penalty of Rs.5,000 imposed in each case under Rule 15A of the Cenvat Credit Rules, the learned advocate argued that the credit was being availed on statutory documents after informing the Revenue, indicating no malafide intent. The Tribunal agreed with this argument and set aside the penalties imposed on the appellants in each case, emphasizing that it was a matter of interpreting the rules rather than intentional wrongdoing.In conclusion, the judgment partially allowed the appeal by holding that the denial of Service Tax credit before 1.3.2008 was unjustified, while upholding the denial of Cenvat credit after that date. The lower authority was tasked with quantifying the credit to be reversed based on this decision, and the penalties imposed under Rule 15A were overturned due to the lack of malafide intent in availing the credit.