2011 (3) TMI 34 - AT - Service Tax

Demand and Penalty u/s 78 - Demanding Service Tax, interest and equal amount of penalty as the tax demanded u/s 78 - The amendment to the definition of output service effected from 19.4.2006 that cenvat could be utilized to pay Service Tax on GTA Service Held that the demand relating to the period up to 18.4.2006 is not sustainable and the demand confirmed for the period from 19.4.2006 is sustained - The assessee could not be penalized in relation to the liability sustained - Appeal is disposed in favour of assessee.

Summary

Issues:
1. Utilization of cenvat credit for payment of Service Tax on GTA service.
2. Validity of utilizing cenvat credit for Service Tax as a recipient of GTA service.
3. Barred by limitation for show cause notice.
4. Bonafide belief in utilizing cenvat credit.
5. Legal position post-amendment to the definition of output service.
6. Tribunal's decision on utilizing cenvat credit for GTA service.
7. Liability for the period up to 18.4.2006.
8. Liability for the period from 19.4.2006.
9. Penalty imposition in relation to the liability sustained.

Analysis:

1. The appeal was filed by M/s. Bangalore Oxygen Co. Pvt. Ltd. regarding the utilization of cenvat credit for the payment of Service Tax on GTA service. The Original Authority had held that the credit could not have been validly utilized for this purpose.

2. The appellant submitted a Final Order in a similar case, arguing that cenvat credit could be used to discharge liability on GTA service up to a certain date. The Tribunal found merit in this argument and held that the demand for the period up to 18.4.2006 was not sustainable, based on the legal provisions at that time.

3. The department argued that post-amendment to the definition of output service from 19.4.2006, the appellant could not have believed in utilizing cenvat credit for Service Tax on GTA service. The internal audit unearthed these transactions, preventing the wrongful utilization of cenvat credit beyond the legal provisions.

4. After examining the case records and submissions, the Tribunal agreed with the appellant's reliance on the Final Order and a previous Tribunal decision. It held that the demand for the period up to 18.4.2006 was not sustainable, while the demand for the period from 19.4.2006 was upheld due to the changed legal position.

5. Given that the dispute was not isolated, the Tribunal decided that the appellant should not be penalized for the sustained liability. Therefore, the appeal was allowed, and the case was remanded to the Original Authority for re-determination of the appellant's liability.

6. The judgment emphasized the importance of legal provisions and the utilization of cenvat credit in compliance with the law. It also highlighted the significance of audit processes in uncovering discrepancies and ensuring adherence to legal positions.