2011 (7) TMI 457 - AT - Service Tax

Utilization of cenvat credit - Appellant is not simply a provider of output service but also a manufacturer of the excisable goods - The appellant contended that till 28-2-2008 for the manufacture of final products the service of Goods Transport Agency remained an output service and, therefore, Cenvat Credit was permissible to be utilized for payment of service tax upto 28-2-2008 - As far as the period beyond 18-4-2006 is concerned, the Tribunal in the case of Alstom Ltd. v. CCE 2008 -TMI - 30469 - CESTAT, CHENNAI held in that case that the credit cannot be utilized for paying service tax for this period as well - As such, as far as the period beyond 18-4-2006 is concerned, held that the appellant/respondent-assessees are not entitled to utilize Cenvat Credit for payment of service tax on GTA service and therefore, the duty demand and demand of interest are justified - Penalty dropped.

Summary

Issues:
Interpretation of law regarding utilization of Cenvat Credit for payment of service tax on GTA services.

Analysis:
The appellants, engaged in the manufacture of cotton yarn and fabrics, availed Cenvat Credit on inputs and services, including outward transportation of finished goods through GTA Service. The lower adjudicating authority demanded payment through PLA or cash for GTA services, not Cenvat Credit. The Commissioner (Appeals) upheld this decision, leading to the appeals. The appellants argued that till 28-2-2008, Cenvat Credit was permissible for service tax payment, citing relevant court and tribunal decisions. The issue was whether service tax on GTA services could be paid using Cenvat Credit.

The learned JDR contended that the issue was settled, citing a Tribunal decision stating that service tax on taxable services must be paid in cash, not through Cenvat Credit. The JDR emphasized that the cited court decision was not applicable to the case at hand due to the timeline involved. The Tribunal's decision in another case was also referenced to support this argument.

The judgment analyzed the submissions and records, noting that the Explanation to Rule 2(p) in Cenvat Credit was deleted from 19-4-2006. Quoting relevant case law, the judgment emphasized that service tax on GTA services should be paid in cash, not through Cenvat Credit, for both service providers and manufacturers of dutiable products. The Tribunal's decision in a related case further clarified that post-18-4-2006, Cenvat Credit could not be used for service tax payment on GTA services. The judgment highlighted that the court decision cited by the appellants was not applicable due to the timeline discrepancy.

Consequently, the judgment upheld the lower authorities' decision on demand and interest against the appellants. However, considering the conflicting nature of legal interpretations on the issue, the judgment deemed the imposition of penalties unjustifiable. The appeals were disposed of accordingly, maintaining the demand and interest but setting aside the penalties.