2010 (12) TMI 163 - AT - Service Tax

GTA services - service tax was paid out of the Cenvat credit on GTA services - CBECs Excise Manual of Supplementary Instructions shows that there is no legal bar to the utilisation of Cenvat credit for the purpose of payment of service tax on the GTA services - respondents were well within their right to utilize the Cenvat credit for the purpose of payment of service tax - Commissioner (Appeals) as well as the Tribunal have held that the respondents were entitled to pay the service tax from the Cenvat credit Appeal allowed

Summary

Issues:
Whether a person discharging service tax liability as a deemed service provider is entitled to avail CENVAT credit for payment of GTA service tax.
Whether a deemed credit under Service Tax law can be set off against excise duty liability.

Analysis:
1. The issue in this case revolves around whether a person, not the actual service provider but discharging service tax liability as a deemed service provider, can avail CENVAT credit for paying GTA service tax. The appellant argued that the case is covered by a judgment of the Honorable High Court of Punjab & Haryana, which allowed similar relief in a previous case. The learned D.R., however, contended that a deemed credit under the Service Tax law cannot be set off against excise duty liability, as per the spirit of CENVAT Rule.

2. The Honorable High Court of Punjab & Haryana had framed a question of law in a previous case to decide a similar appeal, questioning whether a person discharging service tax liability as a deemed service provider can avail CENVAT credit for GTA service tax payment, even if not using the inputs for providing taxable services. The court had ruled in favor of the assessee, stating that there is no legal bar to utilizing CENVAT credit for paying service tax on GTA services, as per CBEC's Excise Manual and Rule 3(4) (e) of the CENVAT Credit Rules, 2004. The court affirmed that utilizing CENVAT credit for service tax payment is permissible, and the appellant was within their right to do so.

3. The Tribunal, after hearing both sides and examining the record, found no factual dispute in the present appeal. Referring to the judgment of the Honorable High Court, the Tribunal concluded that the appellant was entitled to pay service tax from CENVAT credit, as done in the case of Nahar Industrial Enterprises Ltd. The Tribunal dismissed the appeal of the revenue, stating that the question of law was answered in favor of the assessee, allowing the present appellant to succeed, and its appeal was allowed accordingly.