Cenvat credit on transport service tax can be used when a manufacturer is treated as an output service provider.

A manufacturer of excisable goods that pays service tax on transportation of goods by road may be treated as an output service provider for Cenvat credit purposes. The Court accepted the Tribunal's view that Rule 3(4) of the Cenvat Credit Rules, 2004 permits utilisation of Cenvat credit for payment of service tax on output service, and that payment of tax on the transport service supports that status. Relying on Delhi and Punjab & Haryana High Court decisions, the Court found no reason to take a different view, so the assessee was entitled to use the credit accordingly and the Revenue's appeal failed.

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Issues: Whether a manufacturer of excisable goods who pays service tax on transportation of goods by road can be treated as an output service provider for the purpose of utilisation of Cenvat credit under the Cenvat Credit Rules, 2004.

Analysis: The Tribunal had held that Rule 3(4) permits utilisation of Cenvat credit for payment of service tax on output service and that, once service tax is paid on the transport service, the assessee is to be treated as a service provider in relation to that output service. The Court found that this view was supported by the decisions of the Delhi High Court and the Punjab and Haryana High Court, and no error was shown in those decisions to warrant a different view.

Conclusion: The assessee was entitled to treat the transport service as output service and to utilise the credit accordingly.

Final Conclusion: The Revenue's appeal failed and the Tribunal's order allowing the assessee's claim was upheld.

Ratio Decidendi: Where a manufacturer pays service tax on an output transportation service, Cenvat credit may be utilised in accordance with Rule 3(4), and the manufacturer cannot be denied the status of an output service provider merely because it also manufactures excisable goods.

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