2007 (6) TMI 124 - AT - Service Tax

Cenvat credit of service tax - Appellant utilised for payment the service tax the credit of service tax paid on the transport of material to their factories on subsequent transport - Tribunal declared the credit utilised for payment of service tax on subsequent transport is valid

Summary

Issues:
- Utilization of service tax credit for payment of service tax on subsequent transport
- Interpretation of Sub-Rule 4 of Rule 3 of Cenvat Credit Rules 2004

Analysis:
The appeals before the Appellate Tribunal CESTAT, New Delhi involved the issue of whether manufacturers of Chlorine parafide could utilize service tax credit for the payment of service tax on subsequent transport. The appellants contended that they were entitled to take credit of the service tax paid in relation to the transport of materials to their factories. The impugned order had denied them this benefit, stating that manufacturers were not allowed to use service tax credit for payment of service tax on transport services.

The learned representative referred to a previous case before the Tribunal involving Nahar Industrial Enterprises Ltd., where it was held that there was no restriction on the use of service tax credit for payment of service tax or excise duty. The Tribunal further analyzed Sub-Rule 4 of Rule 3 of Cenvat Credit Rules 2004, which pertains to the utilization of Cenvat credit. This sub-rule explicitly allows for the credit to be used for payment of excise duty and service tax on any output service. Therefore, the payment of service tax is a valid use of the credit. The Tribunal determined that since the appellants were treated as service providers when paying service tax on transport services, the transport involved could be considered an output service. Consequently, the Commissioner's finding that manufacturers of excisable goods could not be deemed providers of output service was deemed unsustainable. The Tribunal's decision in the Nahar Industrial Enterprises Ltd. case supported the appellants' argument.

In conclusion, the appeals were successful, and the appellants were allowed to utilize the service tax credit for the payment of service tax on subsequent transport. Any consequential relief was granted to the appellants as well. The judgment was dictated and pronounced in open court.