2016 (3) TMI 1252 - AT - Service Tax

CENVAT credit - GTA services - only dispute in this case is that the appellant was entitled to take Cenvat credit of 25% of the gross amount charged by the goods transport agency and not on the entire amount of service tax paid by the appellant - Held that - Since the fact is not under dispute that the service tax paid by the appellant was taken as Cenvat credit, denial of such credit is not in confirmity with Rule 3 of the Cenvat Credit Rules, 2004, which mandates that service tax paid on input service received by the manufacturer of final product is eligible for Cenvat credit - denial of credit unjustified - appeal allowed - decided in favor of appellant.

Summary

Issues Involved:
Service tax liability under reverse charge mechanism, Cenvat credit entitlement on freight charges, Adjudication order confirmation, Denial of Cenvat credit, Statutory provisions compliance.

Analysis:

1. Service Tax Liability under Reverse Charge Mechanism:
During the period in question, the appellant paid service tax under the reverse charge mechanism as per Rule 2(1)(d)(v) of the Service Tax Rules, 1994. The appellant paid 100% of the service tax liability in relation to freight charges and utilized the amount as Cenvat credit. The dispute arose when the Central Excise Department objected to the appellant taking the entire amount as Cenvat credit instead of the stipulated 25% of the gross amount charged by the goods transport agency.

2. Adjudication Order Confirmation:
Following the objection raised by the Central Excise Department, a show cause notice (SCN) was issued, leading to an adjudication order dated 24-8-2012. The adjudication order confirmed a Cenvat credit of &8377; 55,799/- and imposed an equal amount of penalty on the appellant. Subsequently, the Commissioner (Appeals) upheld the adjudication order, prompting the appellant to file the present appeal before the Tribunal.

3. Cenvat Credit Entitlement on Freight Charges:
The primary contention in the case revolved around the appellant's entitlement to Cenvat credit. The appellant argued that as per Rule 3 of the Cenvat Credit Rules, 2004, service tax paid on input services received by the manufacturer of the final product is eligible for Cenvat credit. The appellant maintained that since the service tax paid on the entire amount of freight charges was utilized as Cenvat credit, any denial of such credit would be contrary to the statutory provisions.

4. Denial of Cenvat Credit and Statutory Compliance:
Upon hearing arguments from both sides and examining the records, the Tribunal concluded that the denial of Cenvat credit to the appellant was unjustified and not in compliance with the statutory provisions. The Tribunal emphasized that since the appellant had paid the service tax and utilized it as Cenvat credit, any denial of the credit would not align with Rule 3 of the Cenvat Credit Rules, 2004. Consequently, the Tribunal set aside the impugned order, ruling in favor of the appellant.

In conclusion, the Tribunal allowed the appeal, holding that the appellant was entitled to the Cenvat credit on the entire amount of service tax paid on freight charges, in accordance with the relevant statutory provisions.