2012 (7) TMI 738 - AT - Service Tax

Cenvat credit eligibility of the assessee to utilize the cenvat credit taken by them of the service tax and of the central excise duty, for discharging the service tax liability on GTA services Held that - In the case of Aravind Fashions Ltd. (2011 (9) TMI 852 - KARNATAKA HIGH COURT) held that assessee is eligible to utilize the cenvat credit for discharging of service tax liability, which has been imposed on them as a recipient of services. Decided in favor of assessee

Summary

Issues:
Eligibility of the assessee to utilize cenvat credit for discharging service tax liability on GTA services.

Analysis:
The judgment by the Appellate Tribunal CESTAT, Ahmedabad involved two stay petitions filed by the Revenue against Orders-in-Appeal, with the assessee filing cross objections. The impugned orders were in favor of the assessee, and the cross objections were disposed of as they supported the orders. The main issue revolved around the eligibility of the assessee to use cenvat credit for paying service tax on GTA services. The Commissioner (Appeals) had allowed the utilization of cenvat credit based on previous Tribunal judgments. The Revenue's appeal contested this decision, arguing that the consignor or consignee, although liable to pay service tax, did not actually provide any taxable service, thus making the service tax payment ineligible for credit utilization.

The Revenue contended that the consignor or consignee could not be considered an "actual service provider" under legal fiction, and therefore, the service tax on GTA services could not be paid using cenvat credit. The Commissioner (Appeals) had interpreted the rules differently, stating that the service for which service tax liability existed should be treated as an "output service" under Rule 2(p) of the Cenvat Credit Rules, 2004. The explanation to Rule 2(p) clarified that if a person liable to pay service tax did not provide any taxable service, the service would be deemed as output service. However, the Tribunal found that the GTA service could not be considered output service for the assessee, as they were registered for manufacturing final products.

The Tribunal highlighted that in cases of inward transportation of inputs or capital goods, service tax paid on such services would be eligible as credit if the receiver was a manufacturer of excisable goods or a service provider. However, the receiver had to pay service tax in cash if required for inward transportation, as it was not specified under Rule 3(4) for cenvat credit utilization. The Tribunal also noted previous decisions cited by the counsel supporting the assessee's eligibility to use cenvat credit for service tax liability, emphasizing that the issue was no longer res-integra.

Ultimately, the Tribunal found in favor of the assessee, stating that they were eligible to utilize cenvat credit for discharging service tax liability on GTA services, as confirmed by the judgment of the High Court of Karnataka in a similar case. The appeals filed by the Revenue were rejected based on the established legal precedents and interpretations.

(Dictated & Pronounced in Court)