2010 (5) TMI 608 - HC - Service Tax

GTA service recipient of services - payment of service tax by using cenvat credit held that - there is no legal bar to the utilisation of Cenvat credit for the purpose of payment of service tax on the GTA services. - , the service tax was paid out of the Cenvat credit on GTA services and, hence, the respondents were well within their right to utilize the Cenvat credit for the purpose of payment of service tax. The Commissioner(Appeals) as well as the Tribunal have rightly held that the respondents were entitled to pay the service tax from the Cenvat credit.

Summary

Issues:
- Utilization of Cenvat credit for payment of service tax on GTA services
- Interpretation of Cenvat Credit Rules, 2004
- Legal entitlement to avail Cenvat credit for service tax payment as a deemed service provider

Utilization of Cenvat credit for payment of service tax on GTA services:
The case involved a dispute where the respondents, engaged in manufacturing textile goods, utilized Cenvat credit for paying service tax on Goods Transport Agency (GTA) services. The Department contended that the service tax should have been paid in cash, not from the Cenvat credit. The Adjudicating Authority confirmed the demand for service tax, interest, and penalty. However, the Commissioner (Appeals) set aside the order, stating that the services received by the respondents for which they were liable to pay service tax qualified as "Output Service" under the Cenvat Credit Rules, allowing the service tax to be paid from the Cenvat credit.

Interpretation of Cenvat Credit Rules, 2004:
The Tribunal upheld the Commissioner (Appeals)'s decision, leading to the revenue challenging the order. The main question of law considered was whether a person, not the actual service provider but deemed to discharge service tax liability, could avail Cenvat credit for paying GTA service tax. The learned counsel for the revenue argued against using Cenvat credit for service tax payment. However, it was noted that CBEC's Excise Manual of Supplementary Instructions and Rule 3(4)(e) of the Cenvat Credit Rules, 2004, did not prohibit utilizing Cenvat credit for service tax payment on output services, including GTA services. The Tribunal and Commissioner (Appeals) correctly determined that the respondents were entitled to use Cenvat credit for service tax payment.

Legal entitlement to avail Cenvat credit for service tax payment as a deemed service provider:
Ultimately, the High Court ruled in favor of the assessee, stating that there was no legal impediment to utilizing Cenvat credit for GTA service tax payment. The Court found no merit in the revenue's appeals and dismissed them accordingly, affirming the right of the respondents to pay service tax from Cenvat credit.