Tribunal rules in favor of appellant on service tax liability, allows Cenvat credit

The tribunal ruled in favor of the appellant, holding that they are not liable to pay service tax on Goods Transport Agency (GTA) services under the reverse charge mechanism (RCM) when the transport agency has already paid it. The appellant was also deemed entitled to Cenvat credit for the service tax paid by the transport agency. The tribunal set aside the previous order, allowing the appeal and concluding that demanding service tax from the appellant in such circumstances would result in impermissible double taxation.

---

---

Issues Involved:
1. Liability of the appellant to pay service tax on Goods Transport Agency (GTA) services under the reverse charge mechanism (RCM) when the service provider has already paid the service tax.
2. Entitlement of the appellant to Cenvat credit for the service tax paid by the transport agency.

Summary:

Issue 1: Liability to Pay Service Tax on GTA Services Under RCM
The department argued that the appellant, as the recipient of GTA services, is liable to pay service tax under RCM as per Rule 2(i)(d)(v) of the Service Tax Rules, 1994. The service tax paid by the goods transport agency (GTA) is considered a deposit, making the appellant liable to pay the service tax. The appellant contended that demanding service tax from them when the transport agency has already paid it amounts to double taxation, which is not legal. The tribunal found that although the appellant is legally liable to pay the service tax, the transport agency had already paid it, and this payment was not disputed by the jurisdictional officer. Therefore, demanding service tax from the appellant would result in double taxation, which is impermissible. The tribunal concluded that the revenue cannot demand the same amount twice.

Issue 2: Entitlement to Cenvat Credit
The department also argued that since the payment made by the transport agency is considered a deposit, the appellant is not entitled to Cenvat credit. The appellant argued that since the transport agency paid the service tax and the assessment was not challenged, they are legally entitled to the credit. The tribunal agreed, stating that since the service tax payment by the transport agency was valid and not altered by the department, the appellant is entitled to Cenvat credit. The tribunal cited multiple judgments supporting the view that service tax paid by the transport agency satisfies the tax liability, and no further tax can be demanded from the service recipient. Consequently, the appellant is eligible for Cenvat credit for the service tax paid by the transport agency.

Conclusion:
The tribunal set aside the impugned order on both counts, ruling that the appellant is not liable to pay service tax on GTA services under RCM when the transport agency has already paid it, and the appellant is entitled to Cenvat credit for the service tax paid by the transport agency. The appeal was allowed.

Pronouncement:
The judgment was pronounced in the open court on 11.10.2023.

---