2007 (12) TMI 31 - AT - Service Tax

Appellate Tribunal allows credit for Goods Transport Agency's Service as output service

The Appellate Tribunal allowed the appeal, holding that the appellants were entitled to avail credit for payment of Service Tax on 'Goods Transport ... CENVAT credit on input services - Goods Transport Agency's Service - 'Output service' (definition and Explanation) - deemed output service - utilisation of CENVAT credit for payment of service tax'Output service' (definition and Explanation) - deemed output service - utilisation of CENVAT credit for payment of service tax - Whether CENVAT credit on input services could be validly utilised for payment of service tax on Goods Transport Agency's Service for the period when the Explanation to the definition of 'output service' was in force - HELD THAT: - The Bench held that, while the Explanation to the definition of 'output service' was in force, a person liable to pay service tax who did not provide any taxable service would have the service for which he was liable to pay tax deemed to be his 'output service.' Consequently, the service tax paid on Goods Transport Agency's Service availed in connection with the appellant's activities fell within the scope of 'output service' and the appellants were entitled to utilise CENVAT credit of tax paid on input services for payment of service tax on such GTA service. The decision of the lower authorities disallowing credit was thus unsustainable. Reliance on an earlier Board circular and other administrative clarifications did not outweigh the statutory effect of the Explanation while it was operative; earlier Tribunal decisions applying the same Explanation were followed. [Paras 1, 3, 5]The impugned order disallowing CENVAT credit for payment of service tax on the Goods Transport Agency's Service is set aside and the appeal is allowed.Final Conclusion: During the currency of the Explanation to the definition of 'output service', the GTA service on which service tax was paid was to be treated as the assessee's output service and CENVAT credit on input services could lawfully be utilised for payment of service tax; the impugned disallowance is set aside and the appeal allowed. Issues:1. Service tax demand on CENVAT credit utilization for 'Goods Transport Agency's Service' for the period April-September 2005.2. Interpretation of the definition of 'Output service' under Rule 2(p) of the CENVAT Credit Rules, 2004.3. Applicability of the Explanation to the definition of 'Output service' during the dispute period.4. Validity of availing credit for payment of Service Tax on 'Goods Transport Agency's Service.'5. Comparison with similar judgments allowing credit for similar situations.6. Consideration of circular dated 3-10-2005 of the Board regarding Service Tax liability.Analysis:1. The Appellate Tribunal, after examining the records and considering the demand for service tax of Rs. 94,801/- on CENVAT credit utilization for 'Goods Transport Agency's Service,' noted a similar allowance of credit to other assessees in a previous case. The appeal was taken up after dispensing with pre-deposit.2. The Tribunal referred to a previous Final Order and analyzed the definition of 'Output service' under Rule 2(p) of the CENVAT Credit Rules, 2004. The Explanation to the definition clarified that if a person liable for paying service tax does not provide any taxable service, the service for which the tax is due shall be deemed as the output service.3. During the dispute period, the Explanation to the definition of 'Output service' was in force. The appellants were only receiving taxable services and not providing any, making the 'Goods Transport Agency's Service' received by them deemed as their 'output service' for Service Tax purposes.4. The Tribunal held that the appellants were entitled to avail credit for payment of Service Tax on the 'Goods Transport Agency's Service' as it constituted their 'output service.' The decision of the lower authorities disallowing the credit was deemed unsustainable based on the Explanation.5. Citing similar judgments, the Tribunal emphasized that payment of Service Tax on services like 'Goods Transport Agency's Service' constituted an 'output service,' allowing for the valid availing of credit for tax paid on input services or goods.6. The Tribunal considered a circular dated 3-10-2005 of the Board, which clarified certain aspects of Service Tax liability. However, the Tribunal found that the circular did not consider the Explanation to the definition of 'Output service' and could not hold good during the currency of the Explanation. As a result, the impugned order disallowing the credit was set aside, and the appeal was allowed.