2014 (10) TMI 31 - AT - Service Tax

Utilizing Cenvat Credit for Service Tax on Goods Transport: Tribunal Upholds Commissioner's Decision

COMMISSIONER OF SERVICE TAX, RAIGAD Versus DUJODWALA PRODUCTS LTD

COMMISSIONER OF SERVICE TAX, RAIGAD Versus DUJODWALA PRODUCTS LTD - TMI Issues:Whether the Respondent can utilize Cenvat credit for service tax on Goods Transport Agency Services on reverse charge basis from June 2007 to November 2007.Analysis:The appeal was filed by the Appellant (Revenue) against the Order-in-Appeal set aside by the Commissioner of Central Excise (Appeals), Mumbai Zone-II. The primary issue revolved around the entitlement of the Respondent to use Cenvat credit for paying service tax on Goods Transport Agency Services under reverse charge mechanism during the specified period. The Appellant's representative reiterated the grounds of appeal, while the Respondent's counsel argued that the service tax paid on reverse charge basis falls under the definition of 'output service' as per Rule 2(p) and can be covered under Rule 3(4)(e) of the Cenvat Credit Rules, 2004.The Tribunal considered the submissions from both sides and analyzed the relevant legal provisions. The explanation under Rule 2(p) clarified that even if a person is not providing service but is paying service tax, the service on which tax is paid shall be deemed as 'output service.' The Tribunal also referred to Rule 3(4) which allows for the utilization of Cenvat credit for payment of service tax on output services. Since the Respondent paid service tax on Goods Transport Agency Services, it was deemed as an 'output service,' making the utilization of Cenvat credit legal and correct.Moreover, the Tribunal cited a Larger Bench judgment in a similar case which confirmed the legality of utilizing Cenvat credit for service tax payment on Goods Transport Agency Services. The judgment referenced decisions from various High Courts that supported the view that there is no legal restriction on using Cenvat credit for service tax payment on such services. The Tribunal concluded that prior to March 1, 2008, there was no bar on utilizing Cenvat credit for service tax payment, as affirmed by the Larger Bench and High Court decisions.Based on the settled legal position and precedents, the Tribunal found no fault in the Commissioner's order and upheld the decision. Consequently, the Appeal filed by the revenue was dismissed, affirming the legality of utilizing Cenvat credit for service tax on Goods Transport Agency Services under reverse charge mechanism during the specified period.