2014 (5) TMI 461 - HC - Service Tax

High Court allows Cenvat credit for service tax on goods transport service; Revenue's appeals dismissed.

UNION OF INDIA Versus FLOWSERVE MICROFINISH VALVES PVT. LTD.

The High Court upheld the decision of the Appellate Authority, allowing the assessee to avail Cenvat credit for service tax on goods transport service ... Demand of service tax - CENVAT Credit - GTA service - Held that:- The fact that the respondent has been assessed both under the Excise Act and the Service Tax, is not in dispute. It is also not in dispute that in view of the Circular issued by C.B.E. & C., dated 3-10-2005 referred to in the order of the Appellate Authority, when the person discharging Services Tax liability is not the provider of output services, such recipient of taxable services even if they discharge their Service Tax liability under Section 68(2) are not entitled to avail credit of the Service Tax paid on taxable services. However, there is no prohibition for utilizing the credit for the payment of Service Tax. - No question of law arises - CCE, Chandigarh v. M/s. Nahar Industrial Enterprises Ltd. [2007 (3) TMI 201 - CESTAT NEW DELHI] and The India Cements Ltd. v. CCE, Salem [2007 (3) TMI 83 - CESTAT, CHENNAI] - Decided against Revenue. Issues:1. Interpretation of Cenvat credit eligibility for service tax on goods transport service.2. Validity of circular dated 3-10-2005 issued by C.B.E. & C.3. Justification of Appellate Authority's decision over Original Authority's order.4. Application of principles laid down by the Supreme Court in similar cases.5. Assessment under both Excise Act and Service Tax Act.Analysis:1. The issue in this case revolves around the interpretation of Cenvat credit eligibility for service tax on goods transport service. The Adjudicating Authority initially held that the assessee was not entitled to avail Cenvat credit for service tax on goods transport service. However, the Appellate Authority reversed this decision, allowing the appeals based on the Circular dated 3-10-2005 issued by C.B.E. & C. The Appellate Authority held that there is no prohibition on utilizing the credit for the payment of service tax, which led to the rejection of the Revenue's appeal.2. The validity of the Circular dated 3-10-2005 issued by C.B.E. & C. was a crucial aspect of the case. The Circular was referenced in the order of the Appellate Authority to support the decision that recipients of taxable services, even if not the providers of output services, are not entitled to avail credit of the service tax paid on such services. However, the Circular does not bar the utilization of credit for the payment of service tax, which played a significant role in the final judgment.3. The justification of the Appellate Authority's decision over the Original Authority's order was challenged by the Revenue in the appeals. The Revenue contended that the assessee was not entitled to make use of Cenvat credit, as held by the Original Authority. However, the High Court upheld the decision of the Appellate Authority, emphasizing that there was no legal basis to set aside the Appellate Authority's order.4. The application of principles laid down by the Supreme Court in similar cases was crucial in determining the outcome of the appeals. The High Court referred to judgments such as CCE, Chandigarh v. M/s. Nahar Industrial Enterprises Ltd. and The India Cements Ltd. v. CCE, Salem, where similar issues regarding Cenvat credit eligibility were decided in favor of the assessee. These precedents supported the decision to dismiss the Revenue's appeals in this case.5. Lastly, the High Court acknowledged that the respondent had been assessed under both the Excise Act and the Service Tax Act. It was established that the Circular dated 3-10-2005, along with the principles laid down by the Supreme Court in relevant cases, supported the conclusion that the appeals lacked merit. Therefore, the High Court dismissed the appeals, affirming the decision of the Appellate Authority and the Tribunal.