2018 (10) TMI 1559 - AT - Service Tax

Tribunal rules in favor of appellant on pre-01.04.2008 CENVAT credit for outward transportation. Post-01.04.2008 period aligns with SC decisions.

CC, CE & ST, Hyderabad –IV Versus Vijay Electricals Ltd. (Vice-Versa)

The Tribunal ruled in favor of the appellant for the pre-01.04.2008 period, allowing CENVAT credit on service tax paid for outward transportation of ... CENVAT Credit - service tax paid under reverse charge mechanism on goods transport agency - period prior to 01.04.2008 - Period post 01.04.2008. Eligibility to avail CENVAT credit on the service tax paid on goods transport agency prior to 01.04.2008 - Held that:- There is no dispute as to the fact that such service tax liability has been discharged by the appellant under reverse charge mechanism, availed the CENVAT credit of service tax which is correct as the agreement with Power Grid Corporation indicates that the cost of equipments/transmission line materials were Ex-works and appellant is required to deliver the same at site and Power Grid Corporation have issued the same to appellant for executing the contract of erection, commissioning and installation services - credit for this period allowed. Confirmation of demands for the period post 01.04.2008 - Held that:- It is seen that the Apex Court in various decisions has categorically held that CENVAT credit of the service tax paid on goods transport agency which are eligible to till 01.04.2008 and not for the subsequent period - demands confirmed along with interest are upheld. Penalty - Held that:- Since the issue was settled by the Apex Court in 2018, there is no reason to visit appellant with any penalty - Penalty set aside. Appeal disposed off. Issues:Eligibility to avail CENVAT credit of service tax paid under reverse charge mechanism on goods transport agency during specific periods.Detailed Analysis:1. Background and Appeals: The judgment pertains to three appeals filed against Order-in-Original No. 04/2009 - ST (Commnr.) dated 28.12.2009. Two appeals were filed by the appellant assessee (ST/1354/2010 and ST/3034/2012), and one appeal was filed by the Revenue (ST/1146/2010).2. Facts and Arguments: The key issue revolved around the eligibility of the appellant to avail CENVAT credit of service tax paid under reverse charge mechanism for transporting transmission line materials. The appellant claimed credit based on agreements with Power Grid Corporations indicating the cost of materials as Ex-works.3. Appellant's Position: The appellant, a manufacturer of transmission line materials, argued that they were entitled to CENVAT credit based on established legal precedents, including judgments by the Apex Court. They highlighted their contractual obligations to supply, install, and commission transmission lines, justifying their CENVAT credit claims.4. Revenue's Position: The Revenue argued against the appellant's eligibility for CENVAT credit, contending that the transportation services were used for erection and commissioning services, not for transporting materials prepared for Power Grid Corporation.5. Tribunal's Findings: The Tribunal deliberated on the service tax liability under the reverse charge mechanism and the appellant's CENVAT credit entitlement. It noted the appellant's contractual obligations and the nature of the services provided to Power Grid Corporation.6. Pre-01.04.2008 Period: The Tribunal found in favor of the appellant for the period before 01.04.2008, citing legal precedents that supported the appellant's claim for CENVAT credit on service tax paid for outward transportation of goods. Consequently, demands, interest, and penalties for this period were set aside.7. Post-01.04.2008 Period: For the period after 01.04.2008, the Tribunal upheld the lower authorities' findings, aligning with Supreme Court decisions that restricted CENVAT credit eligibility for service tax paid on goods transport agency post this date. The demands confirmed for this period were upheld, but penalties were set aside.8. Final Disposition: The Tribunal disposed of the appeals accordingly, rejecting the Revenue's appeal while allowing the appellant's appeals for the pre-01.04.2008 period and upholding the demands for the post-01.04.2008 period. Penalties imposed on the appellant were set aside based on the settled legal position.In conclusion, the judgment clarified the appellant's entitlement to CENVAT credit for specific periods based on contractual obligations and legal precedents, ultimately ruling in favor of the appellant for the pre-01.04.2008 period but upholding demands for the post-01.04.2008 period.