2007 (9) TMI 220 - AT - Service Tax

Manufacturers win appeal for CENVAT credit on GTA Service, citing past decisions.

The appeal involved the denial of CENVAT credit to manufacturers of Polyester Yarn for service tax paid on Goods Transport Agency's Service. The ... Deemed 'Output Service' under Explanation to rule 2(p) of the CENVAT Credit Rules, 2004 - CENVAT credit utilisable for payment of service tax on Goods Transport Agency service - applicability of Explanation prior to its omission on 19-4-2006Deemed 'Output Service' under Explanation to rule 2(p) of the CENVAT Credit Rules, 2004 - CENVAT credit utilisable for payment of service tax on Goods Transport Agency service - Whether CENVAT credit of duty on inputs/capital goods and of service tax on input services could be utilised to discharge service tax liability on Goods Transport Agency service by a manufacturer for the period October, 2005 to March, 2006 - HELD THAT: - The Tribunal examined the Explanation to the definition of 'Output Service' in rule 2(p) of the CENVAT Credit Rules, 2004 and applied the ratio of earlier Bench decisions where it was held that when a person liable to pay service tax does not himself provide any taxable service, the service for which he is liable is to be treated as a deemed 'Output Service'. On that basis GTA service on which the assessee discharged service tax liability was held to be its 'Output Service', thereby permitting utilisation of CENVAT credit (including credit of duty on inputs and capital goods and credit of service tax on input services) for payment of that tax. The Tribunal noted that the period in dispute is prior to the omission of the Explanation on 19-4-2006, and therefore the cited precedents are applicable. No stay of those decisions was shown by the Revenue. Following those decisions, the impugned denial of credit was held unsustainable. [Paras 3, 4]Impugned order set aside; appeal allowed and CENVAT credit utilisation for payment of service tax on GTA service permitted for the period in question.Final Conclusion: The Tribunal allowed the appeal, setting aside the denial of CENVAT credit and holding that, for October 2005 to March 2006, GTA service is to be treated as a deemed 'Output Service' under the Explanation to rule 2(p), permitting utilisation of available CENVAT credit to discharge the service tax liability. Issues: CENVAT credit denial for service tax paid on Goods Transport Agency's Service (GTA Service) availed by manufacturers of Polyester Yarn.Analysis:1. The appeal involved the denial of CENVAT credit to manufacturers of Polyester Yarn for service tax paid on GTA Service availed by them. The appellants had paid service tax amounting to Rs. 50,768 between October 2005 to March 2006 by utilizing credit of duty paid on inputs and capital goods, as well as credit of service tax paid on input services. The department objected to this credit utilization, leading to a demand of Rs. 50,678 from the party under section 73 of the Finance Act, 1994.2. The key issue revolved around the interpretation of the Explanation to the definition of 'Output Service' under rule 2(p) of the CENVAT Credit Rules, 2004. The appellants argued that a similar matter had been considered by the Bench in previous cases, where it was held that if a person liable for paying service tax does not provide any taxable service, the service for which the tax is due should be deemed as 'Output Service'. In line with this interpretation, the GTA Service, on which the appellants paid service tax, was deemed to be their 'Output Service, allowing them to avail the CENVAT credit validly.3. The Judicial Member referred to past decisions, such as the case of R.R.D. Tex (P.) Ltd v. CCE and M.M.S. Steels Ltd. v. CCE, where a similar view was taken, allowing CENVAT credit in comparable circumstances. Notably, the period of dispute in the present case fell before the date on which the relevant Explanation was omitted, making the cited decisions applicable. The Judicial Member considered the submissions of the learned Senior Departmental Representative (SDR) but noted the absence of any claim regarding the department obtaining a stay on the cited decisions.4. Consequently, following the precedent set by the earlier decisions, the impugned order denying the CENVAT credit was set aside, and the appeal of the manufacturers of Polyester Yarn was allowed. The judgment emphasized the applicability of past decisions in determining the eligibility of CENVAT credit for service tax paid on GTA Service, providing clarity on the interpretation of relevant legal provisions in the context of the case.