2007 (6) TMI 515 - AT - Service Tax

Summary

Issues involved: Interpretation of CENVAT Credit Rules regarding utilization of input-duty credit, capital goods credit, and input service tax credit for payment of service tax on Goods Transport Agency's Service (GTA service).

Summary:

Issue 1: Utilization of input-duty credit, capital goods credit, and input service tax credit for payment of service tax on GTA service

The appellants, manufacturers of excisable goods, utilized credit of duty paid on inputs and capital goods, as well as credit on service tax paid on input service, for payment of service tax on GTA service. The department objected to this utilization, demanding duty equivalent to the credit used and imposing penalties. The appellate authorities upheld the denial of credit but vacated the penalties. The question was whether the appellants could validly utilize these credits for service tax on GTA service. The Tribunal referred to the Explanation to the definition of 'output service' under Rule 2(p) of the CENVAT Credit Rules, 2004. It was noted that during the period of dispute, the appellants were only receiving taxable services and not providing any. As per the Explanation, service tax liability for a person not providing any taxable service shall be deemed to be the 'output service'. Therefore, the GTA service on which the appellants paid service tax was deemed their 'output service', allowing them to avail credit of service tax paid on input service and/or duty paid on input or capital goods. Previous decisions and circulars were cited to support this interpretation. The Tribunal set aside the impugned orders and allowed the appeals.

Conclusion:
The Tribunal allowed the appeals, holding that the appellants could utilize input-duty credit, capital goods credit, and input service tax credit for payment of service tax on GTA service, based on the interpretation of the CENVAT Credit Rules and relevant explanations.