2011 (3) TMI 302 - AT - Service Tax

GTA services received - Whether the respondent could pay the service tax on the GTA services received as service recipient by using Cenvat credit or whether the same was required to be paid in cash - The GTA service received by the respondent is not the service which has actually been provided by the respondent - The respondent is only a deemed provider of taxable service by virtue of provisions of Rule 2(v) for the reason he is the person liable to pay the service tax on the GTA service received - Just because by virtue of the legal fiction of Rule 2(v), the respondent are deemed to be the provider of taxable services another legal fiction cannot be imported to treat the GTA service received by them as their output service - The GTA services which is received by the respondent is specifically covered by the definition of input services and the same services cannot be considered as input service as well as output service - Held that the GTA services received by the respondent cannot be treated as their output service and since in terms of the provisions of Rule 3(4) of Cenvat Credit Rules, the Cenvat Credit could be utilised only for payment of service tax on output services or payment of excise duty on final products, the respondents have wrongly paid the service tax on the GTA services received by them through Cenvat credit.

Summary

Issues:
- Dispute regarding payment of service tax on Goods Transport Agency (GTA) services using Cenvat credit as service recipient.
- Interpretation of Rule 2(p) of Cenvat Credit Rules, 2004.
- Applicability of Explanation to Rule 2(p) during the disputed period.
- Determination of whether GTA services can be considered as "output service."

Analysis:
The appeal involved a dispute over the payment of service tax on GTA services by utilizing Cenvat credit as a service recipient. The respondents, manufacturers of Colour Picture Tubes, received GTA services and paid service tax through Cenvat credit, leading to a disagreement with the revenue department. The department contended that the service tax should have been paid in cash, not through Cenvat credit, as GTA services were not considered "output services." The Asstt. Commissioner upheld the demand, but the Commissioner (Appeals) reversed the decision, stating that GTA services were deemed output services during the disputed period.

The Tribunal proceeded ex parte as the respondents did not appear for the hearing despite multiple notices. The revenue argued that GTA services were input services, not output services, and cited relevant legal provisions and precedents. The Tribunal considered the period of dispute from April 2005 to September 2005 and examined the definition of "output service" under the Cenvat Credit Rules, 2004. It clarified that the person liable for paying service tax is deemed a "provider of taxable service," but this does not automatically make received services output services.

The Tribunal analyzed the definition of "output service" and the applicability of the Explanation to Rule 2(p) during the disputed period. It concluded that the GTA services received by the respondents could not be classified as their output services. The Tribunal emphasized that the legal fiction making the respondents deemed providers of taxable services did not extend to treating GTA services as output services. Referring to previous decisions, the Tribunal held that Cenvat credit could only be used for output services or excise duty on final products, not for GTA services. Consequently, the Tribunal allowed the revenue's appeal, setting aside the earlier decision and restoring the Order-in-Original passed by the adjudicating authority.