Court Affirms Tribunal: Reversal of CENVAT Credit Payment is a Correction, Not Double Payment.

The HC dismissed the Revenue's appeal, affirming the Tribunal's decision that the assessee could reverse the amount paid through the CENVAT credit account. This was deemed a correction of entries, not a double payment. The HC relied on Gujarat and Karnataka HC judgments, concluding the circular dated 23-8-2007 was inapplicable.

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Issues:
1. Whether the assessee can suo motu credit the amount in its account after paying service tax through CENVAT credit for output transportation service.
2. Whether the circular dated 23-8-2007 restricts the assessee from reversing entries and taking suo motu credit.
3. Whether the judgments of Gujarat High Court and Karnataka High Court support the assessee's right to reverse entries and take suo motu credit.

Detailed Analysis:
1. The appeal was filed by the Revenue against an order passed by the Custom, Excise, and Service Tax Appellate Tribunal. The issue arose when the assessee utilized CENVAT credit for paying service tax on output transportation service. The Commissioner (Appeals) directed the assessee to make a pre-deposit of the service tax amount, which the assessee did, and also credited the same amount from the CENVAT credit account. A show cause notice was issued to deny this credit. The Tribunal, relying on judgments of Gujarat and Karnataka High Courts, held that the assessee was entitled to suo motu credit the amount as it was just a correction of entries and not a double payment of duty.

2. The Revenue contended that the circular dated 23-8-2007 mandated the payment of service tax for GTA through cash only, and hence, the reversal of entries by the assessee was impermissible. The counsel for the Revenue argued that the assessee should have applied for a refund instead of reversing the entries. On the other hand, the assessee's counsel cited the judgments of Gujarat and Karnataka High Courts to support the correction of entries by the assessee, emphasizing that duty cannot be paid twice.

3. The High Court referred to the Gujarat High Court judgment in S. Subrahmanyan & Co. case and the Karnataka High Court judgment in Commissioner of C. Ex., Bangalore-III v. Motorola India Pvt. Ltd. Both judgments supported the assessee's right to correct entries made in error and held that the amount paid through CENVAT credit account could be reversed. The High Court agreed with the Tribunal's decision, stating that the revenue's demand for service tax on GTA had been fulfilled by the assessee's cash payment, justifying the reversal of the amount from the CENVAT credit account.

In conclusion, the High Court dismissed the Revenue's appeal, upholding the Tribunal's decision that the assessee was entitled to reverse the amount paid through CENVAT credit account as it was a correction of entries and not a double payment of duty. The judgments of Gujarat and Karnataka High Courts supported this position, and the circular dated 23-8-2007 did not apply to the case in question.

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