2010 (8) TMI 710 - AT - Service Tax

GTA services - eligibility of CENVAT credit on the service tax paid on GTA services utilised for outward transportation - Commissioner (Appeals) has not decided on merits the eligibility to credit of service tax on the impugned services and has remanded the matter to the original authority to consider the same in the light of guidelines dated 23-8-2007 issued by the Board. This part of the order of the Commissioner (Appeals) remanding the matter to the original authority is not being challenged by the department - Held that - no opinion on the merits of the case as to the eligibility of credit on the impugned services as the matter is before the original authority for fresh consideration in pursuance of remand by the Commissioner (Appeals), appeal by Department is rejected

Summary

Issues:
Appeal against Commissioner (Appeals) order - Eligibility of Cenvat credit on service tax paid on freight for transportation of finished goods - Interpretation of term "input services" - Challenge on limitation period and penalty imposition.

Analysis:
The appeal before the Appellate Tribunal CESTAT, Chennai involved a dispute regarding the eligibility of Cenvat credit on service tax paid on freight for the transportation of finished goods. The respondents, manufacturers of HDPE Duct [Pipes], had availed Cenvat credit on inputs/capital goods/input services, specifically on GTA services used for outward transportation. The original authority issued a show-cause notice alleging that the GTA services could not be considered as 'input services'. The Commissioner (Appeals) partially set aside the demand for a specific period and remanded the matter for further consideration. The department challenged the decision, arguing that the demand should not have been set aside as time-barred and the penalty should not have been waived.

The department contended that the respondents had not revealed relevant facts regarding the credit taken on GTA services for outward transportation. However, the respondent's advocate cited a Tribunal decision in ABB Ltd. v. CCE&ST, which interpreted "input services" broadly to include activities related to business, supporting the respondent's belief in the eligibility of the credit. The advocate argued that the respondent had a bona fide belief in claiming the credit and had not suppressed any necessary information.

The Appellate Tribunal, after considering both sides' submissions, upheld the Commissioner (Appeals) decision on the issue of limitation in favor of the assessee. The Tribunal noted the differing interpretations on the eligibility of CENVAT credit on GTA services and the pending matter before the High Court of Karnataka. It was acknowledged that the issue involved a question of legal interpretation, and the assessee could not be faulted for any suppression or misstatement of facts. The Tribunal found that the Commissioner (Appeals) had not ruled on the merits of the credit eligibility but had remanded the matter to the original authority for further consideration based on guidelines issued by the Board.

Ultimately, the Tribunal rejected the appeal by the department, concluding that there was no valid reason to interfere with the Commissioner (Appeals) order regarding the limitation period and penalty imposition. The Tribunal expressed no opinion on the credit eligibility issue as it was pending fresh consideration by the original authority following the remand by the Commissioner (Appeals).