2012 (6) TMI 391 - AT - Service Tax

Payment of service tax out of the Cenvat credit on GTA services - department stated that service tax to be paid was an input service and could not be paid through cenvat credit account as the account could be used for payment either duty on finished goods or service tax on output service Held that - On perusal of para 2.4.2 of CBEC s Excise Manual of Supplementary Instructions shows that there is no legal bar to the utilization of Cenvat credit for the purpose of payment of service tax on the GTA services - even as per Rule 3(4)(e) of the Cenvat Credit Rules, 2004, the Cenvat credit may be utilized for payment of service tax on any output service - in favour of the assessee.

Summary

Issues:
Utilization of Cenvat credit for payment of service tax on GTA services.

Analysis:
The case involved the appellants, engaged in the manufacture of Dyed yarn, who availed GTA services for the transportation of input goods by road. They paid the service tax on these services amounting to Rs. 96,332/- as per Rule 2(d)(v) of Service Tax Rules, 1994, where the recipient of the service was required to pay the service tax. The department contended that the service tax on input services could not be paid through the cenvat credit account, which could only be used for duty on finished goods or service tax on output services. The appellants, after Audit pointed out the discrepancy, deposited the disputed service tax amount along with interest. They later filed a refund claim, which was rejected, leading to the appeal before the Tribunal.

The appellant relied on a judgment of the Hon'ble High Court of Punjab & Haryana in the case of Nahar Industrial Enterprises Limited, which supported their position that utilizing the credit for payment of service tax on GTA services was permissible. The appellant argued that the period in question was covered by the said judgment, and hence, they should be allowed the appeal with consequential relief.

The Tribunal considered the submissions and referred to the observations made by the Hon'ble High Court in the Punjab & Haryana case. The Court highlighted that there was no legal bar to utilizing Cenvat credit for paying service tax on GTA services, as per CBEC's Excise Manual of Supplementary Instructions and Rule 3(4)(e) of the Cenvat Credit Rules, 2004. It was emphasized that the service tax was paid out of the Cenvat credit on GTA services, and the respondents were entitled to do so. The Commissioner (Appeals) and the Tribunal had rightly held that the respondents were within their rights to use the Cenvat credit for paying service tax. Consequently, the Tribunal dismissed the appeals and upheld the respondents' right to pay service tax from the Cenvat credit.

In conclusion, the Tribunal found that the issue in the present case was similar to the Punjab & Haryana judgment, and since the period was prior to the amendment of Rules, the appellant was eligible to utilize the Cenvat credit for the payment of service tax. Therefore, the appeal was allowed with consequential relief to the appellant.