REVERSAL OF SERVICE TAX PAID ON RCM BASIS

[MOHAN PANDEY]

Dear Sir

Our Company provide Freight & Forwarding & Transportation Service to the Various Customers

1. Company hire transporter form the market and paid Freight Charges to the Transporter and Paid the Service Tax - Reverse Charges Basis as per Service Tax law.

2. After deposit the service tax on above said GTA Services we will take the Credit on above said deposit tax on other services.

3. We are making separate invoice to recover the Freight charges - without collecting of Services because service tax paid by Customer as per RCM Basis).

Now Department Audit party want to Reversal of all such input tax credit taken by us ( e.i. All service tax paid on GTA Freight Charges paid by us ).

They are saying that this is not cover in output services.

Kindly Advise us Asap.

[KASTURI SETHI]

Dear Querist,

You are neither consignor nor consignee. Are you not playing the role of 'intermediary' ? Pl. confirm.

[YAGAY andSUN]

In our view since you are not providing any output services, therefore, availment of CENVAT Credit is doubtful.

[KASTURI SETHI]

Yes.Sir. I am also of the same view. The Department is right.

[MOHAN PANDEY]

Dear sir. we are taken seperate contract regarding goods movement i.e air rail. sea and road . in case of road transport fright paid by us directly to transport er and we are issue the invoice as per contract price. in that case we are adding our margin also and same bills tax paid by our customers as per reverse charge basis. this practice is following almost logistics industry

[MOHAN PANDEY]

we are providing other service like custom clearance . port service. cargo . and above said input tax credit used in other services . the said credit paid by us on gta service inward.

[MOHAN PANDEY]

COMMISSIONER OF SERVICE TAX, RAIGAD VERSUS DUJODWALA PRODUCTS LTD 2014 (10) TMI 31 - CESTAT MUMBAI
Cenvat credit - Goods Transport Agency Services - Reverse Charge mechanism - Held that:- even though the
person is not providing service but is paying service tax as per law on reverse charge basis, by the fiction of
law the service on which he is discharging service tax shall be deemed to be 'output service'. In the present
case also the respondent, since they discharged the service tax on GTA service, the said GTA service
became an 'output service'. - Rule 3(4) of the Cenvat Credit Rules, 2004 provides the manner of utilisation of
the cenvat credit availed by an assessee - From the above provision for utilisation of Cenvat credit, it
provides, amongst others, the Cenvat credit can be utilised for payment of service tax on output service. As
discussed in above para the GTA service though received by the respondent but paid service tax thereoupon,
the said GTA service is an 'output service'. Therefore the utilisation of Cenvat credit for payment of service tax
on GTA made by the respondent is legal and correct - following the Hon'ble Punjab & Haryana High Court
judgment in Nahar Industrial case [2010 (5) TMI 608 - PUNJAB AND HARYANA HIGH COURT] held that
prior to 01.03.2008 the payment of service tax on GTA by utilising Cenvat credit is legal - Decided against
Revenue.

Dear Sir

Kindly advise us same question is arise by the audit party . we can take this case law

[YAGAY andSUN]

This deeming fiction was changed in recent past, may be in 2012 or 2103 budget.

[MOHAN PANDEY]

Dear Experts

Kindly advise us as per CENVAT Credit Rules and any changes in rule & acts in the year (2015-16 to June 2017), we have read many of the such court case in this particulars argument (GTA Inward - Tax paid consider as a input tax credit) of the department decided against the revenue.

Rule 7[(7) The CENVAT credit in respect of input service shall be allowed, on or after the day on which
the invoice, bill or, as the case may be, challan referred to in rule 9 is received:
17[Provided that in respect of input service where whole or part of the service tax is liable to
be paid by the recipient of service, credit of service tax payable by the service recipient shall
be allowed after such service tax is paid:"

Kindly advise us.

[DR.MARIAPPAN GOVINDARAJAN]

In my view you may rely on the case law cited by you.

AI Summary

Freight company disputes audit on input tax credit reversal for service tax under RCM for GTA services. A company providing freight and forwarding services is facing an audit challenge regarding the reversal of input tax credit on service tax paid under the reverse charge mechanism (RCM) for Goods Transport Agency (GTA) services. The audit department argues that the input tax credit is not applicable as output services are not provided. The company contends that the service tax paid on GTA should be considered an 'output service' under certain legal precedents, allowing them to utilize CENVAT credit. The discussion includes references to case law and amendments in CENVAT Credit Rules, seeking expert advice on the matter.