TaxTMI 
TaxTMI 
2011 (3) TMI 186
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....r manufacturing any dutiable final product, they had taken service tax credit under Cenvat Credit Rules, 2004 of the service tax paid on a number of "input services", such as security service, scientific and technical consultancy service, repair and maintenance service, telephone service, courier services, accounts service, etc., and had used this credit for payment of service tax on GTA services received by them for which they were liable to pay service tax as service recipient. The department was of the view that since GTA service received by them is an "input service" received from various Goods Transport Agencies, and not an output service provided to their clients and since in terms of rule 3(4) of Cenvat Credit Rules, 2004, the Cenvat credit could be utilized only towards payment of duty on the finished excisable goods manufactured by an assessee or for payment of service tax on "output services" provided by an assessee and since the GTA service received by the appellant is not their output service, the service tax should have been paid in cash, not by utilizing the Cenvat credit and to the extent the service tax has been paid through Cenvat credit, the credit has been wrongl....
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.... GTA service would be treated as his "output service", that though with effect from 19-4-2006, by Notification No. 8/2006-ST (NT), dated 19-4-2006, Explanation to rule 2(p) was deleted, rule 2(1)(d)(v) of Service Tax Rules, 1994 and rule 2(r) and rule 2(q) of the Cenvat Credit Rules, 2004 still remain in force and, thus, the appellant continues to be a "provider of taxable service", that only with effect from 1-3-2008 by Notification No. 10/2008-ST (NT), dated 1-3-2008, definition of "output service" in rule 2(p) of Cenvat Credit Rules, 2004 was amended so as to exclude GTA service, referred to in section 65(105)(zzp) of the Finance Act, 1994 from its purview and, therefore, during the period prior to 1-3-2008, since the appellant, by virtue of being "person liable to pay service tax" on the GTA service received by them, are "provider of taxable service", the GTA service received by them would be treated as their "output service", that all the three show-cause notices are based on the TRU's Circular No. 345/4/05/TRU, dated 3-10-2005 without explanation as to how the GTA service cannot be treated as "output service" of the appellant, that the show-cause notices do not contain any al....
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....e main point to be decided in this case is as to whether during the period from April 2005 to March 2007, when the appellants as recipient of GTA service, were liable to pay service tax on the same by virtue of section 68(2) of Finance Act, 1994 read with rule 2(1)(d)(v) of Service Tax Rules, 1994, the GTA service received by the appellant could be treated as their "output service" and service tax on the GTA service received by them could be paid through Cenvat credit. 7. During the period from 10-9-2004, the date on which the Cenvat Credit Rules were notified, to 18-4-2006, the definition of the term "output service" is as under : "Rule 2(p) - "output service" means any taxable service provided by the provider of taxable service, to a customer, client, subscriber, policy holder or any other person, as the case may be, and the expressions 'provider' and 'provided' shall be construed accordingly; Explanation.-For the removal of doubts it is hereby clarified that if a person liable for paying service tax does not provide any taxable service or does not manufacture final products, the service for which he is liable to pay service tax shall he deemed to be the output service."....
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....e any taxable service or manufacture any dutiable final products - the category to which the appellant belong. 8.1 During period prior to 19-4-2006 by virtue of the legal fiction of Explanation to rule 2(p), for a person falling in category (b) above, who is liable to pay service tax as service recipient in respect of some taxable service received by him, the service received by him shall be deemed to be his output service. Since this legal fiction is applicable only for the persons of category (b) above, i.e., those who do not provide any taxable output service or any manufacture of dutiable final products, the same is not applicable for the persons of category (a), i.e., those who provide some taxable service/services and/or manufacture some dutiable final products. Therefore, for such persons, the service received by them on which they are liable to pay service tax as service recipient cannot be treated as their "output service" and service tax on the same will have to be paid by cash, not by utilizing input/capital goods duty credit or service tax credit, as rule 3(4) of the Cenvat Credit Rules, 2004 permits utilization of Cenvat credit for payment of central excise duty on ....
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.... service and/or manufactured dutiable final products or did not provide any taxable service or manufactured any dutiable final products, he was required to pay the service tax on the GTA service received by him in cash, not through Cenvat Credit. 9. As regards the period with effect from 19-4-2006, "output service", as defined in rule 2(p) during this period, means any taxable service provided by the "provider of taxable service" to a customer, client, subscriber, policy holder, or to any other person and the term "provided" and "provider" shall be construed, accordingly. During this period, the Explanation to rule 2(p) had been deleted. Thus, during this period only the service actually being provided by an assessee could be treated as his "output service" and the service received by him on which he was liable to pay service tax as service recipient by the provision of section 68(2) of the Finance Act, 1994 read with rule 2(1)(d) of the Service Tax Rules, 1994, could not be treated as his "output service". Thus, during the period with effect from 19-4-2006, irrespective of whether the appellants were providing any taxable output service or manufacturing some final products or w....
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....hile doing so, another legal fiction cannot be created. (2) Rule 2(p), after defining the "output service" states that the expressions - "provider" and "provided" shall be construed accordingly. Thus the "provider of output service" under rule 2(p) is the person who provides any taxable service to a customer, client, subscribe, policy holder or any other person, or in other words, actually provides some taxable service to his client etc. Thus, a person who is deemed "provider of taxable services" under rule 2(r) by virtue of being liable to pay service tax some taxable service received by him, cannot be treated as "provider of output service", if he is not actually providing any taxable service. Therefore, the expression "provider of taxable service" cannot be equated with the expression - "provider of output service." 11. Thus, in respect of the persons providing some taxable output service/services and/or manufacturing dutiable final products, neither during the period prior to 19-4-2006 nor during the period with effect from 19-4-2006, the taxable service received by them, on which they were liable to pay service tax a....