2012 (12) TMI 879 - AT - Service Tax

Service tax liability in respect of GTA services - discharged liability utilizing cenvat credit & not in cash - Held that - As decided in Tribunal s decision in the case of Shree Rajasthan Sytex Ltd. 2011 (8) TMI 265 - CESTAT, NEW DELHI read with judgement in the case of Nahar Industrial Enterprises 2010 (5) TMI 608 - PUNJAB AND HARYANA HIGH COURT & also Auro Spinning Mills and Ors. 2011 (7) TMI 849 - HIMACHAL PRADESH HIGH COURT Cenvat credit is available for payment of GTA services on service tax as recipient of GTA services.

Summary

Issues:
1. Availability of Cenvat credit for discharging service tax on GTA services.
2. Interpretation of Rule 2(r) of Cenvat Credit Rules, 2004.
3. Impact of the amendment in the definition of output services.
4. Applicability of Tribunal decisions on Cenvat credit for GTA services.

Analysis:

The appeal revolved around the issue of whether the appellants could avail Cenvat credit for discharging service tax on GTA services received by them as recipients. The department contended that since the appellants paid service tax for GTA services using Cenvat credit, which should only be utilized for central excise duty or service tax on output services, the payment should have been made in cash. The Addl. Commissioner confirmed the service tax demand, leading to the appeal challenging the decision.

The Tribunal analyzed various decisions, including the judgments of the Hon'ble Punjab & Haryana High Court and the Hon'ble Himachal Pradesh, which established that Cenvat credit could be used for paying service tax on GTA services. However, a crucial amendment in the definition of output services raised a contention by the Revenue that the omission of an explanation from Rule 2(p) affected the eligibility of GTA services as output services for utilizing Cenvat credit.

Referring to the Division Bench's decision in the case of Shree Rajasthan Syntex Ltd., the Tribunal determined that even with the deletion of the explanation in Rule 2(p), GTA services could still be considered as output services under Rule 2(r) of the Cenvat Credit Rules, 2004. The Tribunal differentiated this from a Single Member Bench's decision in the case of Iswari Spinning Mills, emphasizing that the latter did not consider Rule 2(r) in its judgment.

Ultimately, the Tribunal upheld the appeal, citing the precedents set by the decisions in the cases of Shree Rajasthan Syntex Ltd., Nahar Industrial Enterprises, and Auro Spinning Mills. By aligning with these judgments, the Tribunal set aside the service tax demand, providing consequential relief to the appellant based on the interpretation of Cenvat credit rules and the definition of output services.