Tribunal Upholds Decision Allowing CENVAT Credit for Tax on Goods Transport by Road, Dismissing Department's Appeal.

The Tribunal dismissed the Department's appeal, affirming the Ld. Commissioner's decision to drop the service tax demand of Rs. 57,75,619/- with interest and penalty. The Tribunal concurred with the Commissioner's interpretation that the tax liability on "Transportation of Goods by Road" under the reverse charge mechanism could be settled using CENVAT Credit, as supported by previous High Court rulings. The Tribunal found no merit in the Department's argument that the tax should be paid in cash, concluding that the legal position was well-settled in favor of the assessee. Consequently, the appeal by the Revenue was rejected.

---

---

Issues: Department's appeal against dropping of service tax demand by Ld. Commissioner.

Analysis:
1. The Department filed an appeal against the Order-in-Original dropping the service tax demand of &8377; 57,75,619/- with interest and penalty. The issue revolved around the payment of service tax on "Transportation of Goods by Road" under the reverse charge mechanism from January 2005 to October 2005. The Department argued that the tax liability should have been paid in cash, not through CENVAT Credit, as the GTA service was not considered an 'output service' for the assessee.

2. The Ld. Commissioner, in the impugned order, referred to the statutory provisions under CENVAT Credit Rules, 2004, prevalent during the disputed period. The Commissioner noted that the GTA service availed by the assessee was deemed an output service as per the Explanation to Rule 2(p) of the said Rules. Although this explanation was later omitted, the Commissioner concluded that the tax liability could be discharged from CENVAT Credit balances. The Commissioner also relied on various tribunal decisions supporting this interpretation.

3. The Department reiterated its grounds of appeal, emphasizing that service tax should be paid in cash, not through CENVAT Credit. However, the Tribunal, after hearing both sides and reviewing the records, found that the issue had already been settled in favor of the assessee by the Tribunal and several High Courts. The Hon'ble Rajasthan High Court and other High Courts had upheld the assessee's right to utilize credit amounts for paying service tax under reverse charge, as permitted by the Credit Rules during the relevant period.

4. Citing the decisions of various High Courts, the Tribunal held that the Department's appeal lacked merit. The Tribunal upheld the impugned order passed by the Ld. Commissioner, stating that there was no reason to interfere based on the settled legal position. Consequently, the appeal filed by the Revenue was rejected.

---