Cenvat credit on GTA services

[Asked by Guest]

Can cenvat credit of manufacturing activity be utilised by the manufacturer for payment of service tax on GTA services as per the decision held in the case of CCE v.Nahar Industrial Enterprises Ltd (2007 (3) TMI 201 - CESTAT NEW DELHI)= (2007). Please guide.

[Madhukar N Hiregange]

The decision was for the time when the GTA service payments were equated to the output services. At that point of time it was valid. However now GTA services paid by the reciver are not considered as output services, they reamin input services and therefore no set off wouldbe available.

[Brijesh Verma]

Apparently, the view adopted by you on the basis of the judgment of NIEL reported at 7 STR 26 seems to be wrong as the facts of that case are different. In that case the appellant was himself a manufacturer as well as service provider. Whereas in the case narrated by you the assessee is a Deemed Service Provider. So far as payment of GTA tax through Cenvat is concerned the same is not possible as the tax is being paid under reverse charge mechanism. The challan paid by the assessee in respect of tax on GTA service becomes the eligible document for availing Cenvat Credit of such tax paid under Rule 9(1). In absense of such payment i.e. if this tax is paid through credit, your assessee would end up loosing credit of GTA tax.

[Surender Gupta]

I wish the endorse the views of Mr. Brijesh Verma and Mr. Madhukar N Hiregange

AI Summary

Cenvat credit on GTA services: reverse charge payment requires challan; Cenvat cannot be used to discharge that tax.
Whether a manufacturer may utilise Cenvat credit attributable to manufacturing activities to discharge service tax on GTA services is contested; current practice treats GTA services as input services, preventing use of manufacturing Cenvat to pay that liability. Where GTA tax is payable under the reverse charge mechanism the challan evidencing payment is the eligible document for claiming Cenvat under Rule 9(1); attempting to discharge reverse charge tax by Cenvat risks loss of credit, and prior case law relied on different facts where the taxpayer was both manufacturer and service provider.