2007 (9) TMI 119 - AT - Service Tax

Tribunal allows Cenvat credit for Service Tax on GTA Services, emphasizing consistency

The Tribunal upheld the Commissioner's decision allowing the assessees to avail Cenvat credit for paying Service Tax on GTA Services. It interpreted ... Cenvat credit - utilisation of Cenvat credit for payment of Service Tax on output services - output service - provider of taxable service - Goods Transport Services as both input and output service - deeming provision in explanation to Rule 2(p) of the Cenvat Credit Rules, 2004 - Service Tax registration under Section 68(1) and 68(2) of the Finance Act, 1994Cenvat credit - utilisation of Cenvat credit for payment of Service Tax on output services - deeming provision in explanation to Rule 2(p) of the Cenvat Credit Rules, 2004 - Goods Transport Services as both input and output service - Whether Cenvat credit of service tax paid on Goods Transport Agency (GTA) services can be availed and utilized by the assessee for payment of service tax by treating GTA as an output service under the deeming provision in the explanation to Rule 2(p) of the Cenvat Credit Rules, 2004. - HELD THAT: - The Tribunal accepted the reasoning of the Commissioner (A) that, by virtue of the explanation to Rule 2(p) of the Cenvat Credit Rules, 2004, Goods Transport Services used for clearance of goods from the factory are to be treated as 'output service' and, therefore, service tax paid on such GTA services can be treated as credit which may be utilized for payment of service tax on output services. The Bench noted earlier decisions of other Benches (including The India Cement Ltd. v. CCE, Salem and CCE, Chandigarh v. M/s. Nahar Industrial Enterprises Ltd.) and reliance placed on CBEC guidance, and found that the issue had been consistently decided in favour of the assessee on similar facts. The Revenue's contention that the assessees, being manufacturers and having registration only under the provision relevant to discharge of tax on GTA as an input service, were not 'providers' of taxable services and hence ineligible for credit, was not accepted. In view of the precedent and the Commissioner (A)'s conclusion that the GTA payments fall within the deeming provision making them output services, the utilisation of the accumulated credit was upheld and the demands and penalties set aside. [Paras 1, 5]Revenue appeals dismissed; Cenvat credit of service tax paid on GTA services may be availed and utilized by the assessee by treating such GTA as output service under the explanation to Rule 2(p) of the Cenvat Credit Rules, 2004.Final Conclusion: The Tribunal dismissed the Revenue appeals and upheld the Commissioner (A)'s conclusion that service tax paid on Goods Transport Services can be taken as Cenvat credit and utilized for payment of service tax by deeming such GTA as an output service under the explanation to Rule 2(p) of the Cenvat Credit Rules, 2004. Issues:1. Interpretation of Cenvat credit rules regarding the eligibility to avail/utilize credit for payment of Service Tax on GTA Services.2. Consideration of the assessees as persons liable to pay Service Tax.3. Application of Rule 2(1)(d)(v) of the Service Tax Rules, 1994.4. Definition of 'Output Services' and 'provider of taxable service.'5. Utilization of accumulated credit of duty paid on input services for paying duty on output services.6. Validity of utilizing Cenvat credit for payment of Service Tax on output service.7. Impact of Circular No. 345/4/2005-TRU issued by CBEC.8. Comparison with previous Tribunal rulings on similar issues.Analysis:1. The Commissioner (A) set aside Orders-in-Original denying Cenvat credit for Service Tax on GTA Services, considering the assessees as liable to pay Service Tax. He interpreted Rule 2(1)(d)(v) of the Service Tax Rules, 1994, and the explanation to Rule 2(p) of the Cenvat Credit Rules, 2004, to treat such payments as output services eligible for credit utilization.2. Revenue argued that the assessees, being manufacturers of excisable goods, were not providers of taxable services and thus ineligible for Cenvat credit. They contended that the assessees lacked Service Tax Registration for tax liability under Section 68(1) of the Finance Act, 1994, making the credit availed illegal.3. The Tribunal considered previous rulings like The India Cement Ltd. v. CCE and CCE, Chandigarh v. M/s. Nahar Industrial Enterprises Ltd., where it was held that Cenvat credit can be used for payment of Service Tax on output services like GTA Services. The Tribunal dismissed Revenue's appeals based on these precedents.4. The Tribunal noted that the Delhi and Chennai Benches had previously upheld the utilization of Cenvat credit for Service Tax on output services. Following the precedent set by these rulings and previous dismissals of Revenue appeals, the Tribunal found no merit in the current appeals and dismissed them.5. The judgment emphasized the interpretation of Cenvat credit rules, the definition of output services, and the applicability of previous Tribunal decisions in similar cases. The Tribunal's decision was based on consistent rulings allowing Cenvat credit for payment of Service Tax on output services, such as GTA Services, in line with the legal provisions and precedents.