2014 (5) TMI 878 - AT - Service Tax

Goods Transport Agency Service - CENVAT Credit - whether the assessee, manufacturing excisable goods is eligible to discharge service tax liability on GTA service from their cenvat credit account or by cash during the period April 2006 to January 2007 - Held that - in view of the Notification No.10/08-CE (NT) dt. 1.3.2008, GTA service was excluded from the definition of output service under Rule 2(p) of the Cenvat Credit Rules, 2004 and therefore, they are eligible to utilize cenvat credit for payment of service tax on GTA service prior to 1.3.2008. - following the decisions of the Division Bench in the case of Shree Rajasthan Syntex Ltd. (2011 (8) TMI 265 - CESTAT, NEW DELHI), impugned order in so far as the demand of tax along with interest for the period 19.4.2006 to January 2007 is set aside - Decided against Revenue.

Issues Involved:
1. Eligibility of the assessee to discharge service tax liability on Goods Transport Agency (GTA) service from their Cenvat credit account or by cash during the period April 2006 to January 2007.
2. Validity of the demand of service tax and interest for the period from 19.04.2006 to January 2007.
3. Waiver of penalty by the Commissioner (Appeals).

Issue-wise Detailed Analysis:

1. Eligibility to Discharge Service Tax on GTA Service from Cenvat Credit Account:

The primary issue is whether the assessee, who is engaged in the manufacture of excisable goods, can utilize Cenvat credit to discharge service tax on GTA services. The assessee argued that there is no restriction on using Cenvat credit for this purpose based on a harmonious reading of Rule 2(p), 2(q), and 2(r) of the Cenvat Credit Rules, 2004. The relevant provisions and amendments were discussed, including the deletion of the Explanation to Rule 2(p) by Notification No. 8/2006-CE (NT) dated 19.04.2006 and the subsequent exclusion of GTA service from the definition of "output service" by Notification No. 10/2008-CE (NT) dated 01.03.2008.

The Tribunal noted that various High Courts and Tribunal decisions, such as Indian Acrylic Ltd. Vs CCE Chandigarh and Topland Exports Vs CCE Rajkot, supported the assessee's position that Cenvat credit could be used for payment of service tax on GTA services prior to 01.03.2008.

2. Validity of the Demand of Service Tax and Interest:

The Commissioner (Appeals) had modified the adjudication order, restricting the demand of service tax to the period from 19.04.2006 to January 2007, based on the deletion of the Explanation to Rule 2(p). The Revenue contended that the assessee, as a recipient of GTA service, could not be considered an "output service provider" and thus could not use Cenvat credit for this purpose. They relied on decisions such as Saraswati Sugar Mills Vs CCE Delhi and BAPL Industries Ltd. Vs UOI.

However, the Tribunal found that the Hon'ble Madras High Court in Cheran Spinners Ltd. had already decided that Cenvat credit could be used to pay service tax on GTA services for the period prior to 19.04.2006. Consequently, the Tribunal rejected the Revenue's appeal and upheld the assessee's eligibility to use Cenvat credit for the period in question.

3. Waiver of Penalty:

The Commissioner (Appeals) had waived the penalty by invoking Section 80 of the Finance Act, 1994. The Tribunal did not find any specific arguments from the Revenue challenging this waiver in the provided text. Therefore, the waiver of the penalty was implicitly upheld.

Conclusion:

The Tribunal concluded that the assessee was eligible to utilize Cenvat credit for payment of service tax on GTA services for the period from 19.04.2006 to January 2007. The demand of tax along with interest for this period was set aside, and the appeal filed by the assessee was allowed with consequential relief. The appeal filed by the Revenue was rejected.

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