2007 (10) TMI 161 - AT - Service Tax

Tribunal allows appeal, grants credit for service tax on GTA services, dismisses interest imposition.

The Tribunal allowed the appeal, ruling in favor of the appellants and setting aside the impugned order. It held that the appellants were entitled to use ... Utilisation of Cenvat credit for payment of output service tax - GTA services as output service - Non-liability for interest where payment by cash follows an authorized utilisation of Cenvat credit - Precedential application of Tribunal decisionsUtilisation of Cenvat credit for payment of output service tax - GTA services as output service - Non-liability for interest where payment by cash follows an authorized utilisation of Cenvat credit - Whether the appellants were entitled to utilise Cenvat credit for payment of service tax on GTA services and consequently whether interest could be demanded on the subsequent cash deposit - HELD THAT: - The appellants paid service tax on GTA services by utilising Cenvat credit, treating GTA as an output service and relying on the permissibility of credit utilisation under the Cenvat Credit Rules (including the scheme reflected in Rule 2 and Rule 3(4)(e) as relied upon). The Department objected and the appellants later deposited the amount by cash, upon which interest was demanded by the impugned order as if the cash payment were belated. The Tribunal, after considering earlier consistent Tribunal decisions cited by the appellants, held that GTA services are to be regarded as output services for the purpose of availment and utilisation of Cenvat credit and that the initial payment by utilisation of credit was authorised under the Rules. Applying the ratio of the cited precedents, the Tribunal found no merit in the demand for interest arising from the subsequent cash payment and set aside the impugned order, allowing the appeal. [Paras 3, 6]Set aside the impugned order; appeal allowed - appellants entitled to utilise Cenvat credit for payment of service tax on GTA services and not liable to the interest demanded on the subsequent cash deposit.Final Conclusion: The appeal is allowed: the appellants lawfully utilised Cenvat credit for payment of service tax on GTA services for the period 1-1-2005 to 30-9-05, and the demand of interest arising from the later cash deposit is set aside in view of the applicable Cenvat Credit Rules and controlling Tribunal precedents. Issues:1. Whether the appellants were liable to pay interest on the service tax amount paid by cash after utilizing Cenvat credit for GTA services.Analysis:The appellants paid service tax on GTA services using Cenvat credit, which the Department objected to, leading the appellants to pay the entire amount by cash. The issue revolved around whether interest was payable on the cash payment. The appellants argued that Rule 2 of the Cenvat Credit Rules, 2004, classified GTA service as an output service, allowing Cenvat credit utilization for service tax payment. They cited various Tribunal decisions supporting their stance, emphasizing the legality of their initial payment method.The Department did not contest the stay but requested a separate hearing date for the regular appeal. However, the Tribunal, after considering the case records and the cited decisions, concluded that the appellants' situation aligned with the Tribunal precedents. They found no merit in the Department's request for a separate hearing, determining that the appellants were within their rights to use available credit for paying service tax on GTA services. Consequently, the Tribunal set aside the impugned order and allowed the appeal, highlighting the appellants' entitlement to credit utilization based on the cited precedents.In summary, the judgment addressed the issue of interest liability on cash payment after utilizing Cenvat credit for GTA services. The Tribunal upheld the appellants' right to use credit for service tax payment, following precedents and dismissing the Department's request for a separate hearing. The decision favored the appellants, emphasizing the legality of their initial payment method and setting aside the impugned order.