2012 (11) TMI 882 - AT - Service Tax

Cenvat credit of Service Tax on GTA services received on reverse charge basis - denial as assessee should have paid Service Tax in cash - Held that - As decided in CCE, CHANDIGARH Versus M/s NAHAR INDUSTRIAL ENTERPRISES LTD and Others 2010 (5) TMI 608 - PUNJAB AND HARYANA HIGH COURT there is no legal bar to the utilisation of Cenvat credit for the purpose of payment of service tax on the GTA services. If the payments already stand made from the Cenvat Credit account subsequent payment made through PLA shall be refunded - in favour of assessee.

Summary

Issues:
Utilization of Cenvat credit for Service Tax payment on reverse charge basis, validity of show cause notice, entitlement to refund of Service Tax paid from PLA, interpretation of Cenvat Credit Rules.

Analysis:

1. Utilization of Cenvat Credit for Service Tax Payment:
The judgment addresses the issue of whether the appellant was justified in utilizing Cenvat credit for payment of Service Tax on GTA services received on a reverse charge basis during April 2006 to September 2006. The Revenue contended that this utilization was not in accordance with the law and that the Service Tax should have been paid in cash. However, the Commissioner (Appeals) relied on legal precedents, including the decision of the Punjab and Haryana High Court, to support the appellant's right to use the credit for such payments. The Tribunal, following the precedent set in Shree Rajasthan Syntax vs. CCE, held that prior to the issuance of Notification No. 10/08-CE(NT), the appellant was entitled to utilize the Cenvat credit for Service Tax payment. Consequently, the Revenue's appeal on this issue was rejected.

2. Validity of Show Cause Notice and Refund Entitlement:
The judgment also delves into the validity of the show cause notice issued to the appellant, which ultimately led to the payment of Service Tax in cash by the appellant under pressure from the Revenue. Despite the cash deposit, the appellant did not reverse the entries of payment of Service Tax in their Cenvat credit account. The Commissioner (Appeals) opined that since the Service Tax was already paid from the PLA, the appellant was not entitled to a refund. However, the Tribunal disagreed, emphasizing that the appellant should have been granted a refund of the amount deposited through their PLA, as they had not adjusted the deposit in their Cenvat Credit Account. Consequently, the part of the Commissioner (Appeals) order denying the refund was set aside, and the appellant's appeal on this issue was allowed.

3. Interpretation of Cenvat Credit Rules:
The judgment clarifies the interpretation of the Cenvat Credit Rules in the context of utilizing Cenvat credit for Service Tax payment. It highlights the importance of adjusting payments made from the Cenvat Credit account with subsequent payments made through PLA. The Tribunal accepted the appellant's claim that no entries were adjusted in their Cenvat credit account when the payment was made from the PLA. It emphasized that if payments were already made from the Cenvat Credit account, any subsequent payment through PLA should be refunded. This interpretation ensures compliance with the rules governing Cenvat credit utilization and payment mechanisms.

In conclusion, the judgment resolves the issues surrounding the utilization of Cenvat credit for Service Tax payment, the validity of the show cause notice, the entitlement to a refund of Service Tax paid from the PLA, and the interpretation of the Cenvat Credit Rules. It provides clarity on the legal principles governing these matters, ensuring a fair and just resolution for the appellant in this case.