2007 (7) TMI 110 - AT - Service Tax

Stay/dispensation of pre-deposit - Impugned period during which appellant paid service tax by utilizing Cenvat credit is divided in Feb - Apr 06 and Apr,06 - Sep 06 - Appellant is neither entitle for Cenvat credit for any period and ordered for pre-deposit of 50% of tax amount

Summary

Issues:
1. Whether the appellants can use CENVAT credit for paying Service Tax on Goods Transport Agency (GTA) service.
2. Interpretation of the definition of "output service" under Rule 2(p) of the CENVAT Credit Rules, 2004.
3. Impact of the omission of the Explanation to the definition of "output service" on the case.
4. Whether the appellants can be considered as providers of taxable service under Rule 2(r) of the CENVAT Credit Rules, 2004.

Analysis:
1. The appellants, manufacturers of yarn, utilized Goods Transport Agency's (GTA) service for transportation and paid Service Tax through debit in CENVAT account. The department objected to this use of CENVAT credit, resulting in demands on both appellants. The applications sought waiver of predeposit and stay of recovery for the demanded service tax amounts.

2. The definition of "output service" under Rule 2(p) of the CENVAT Credit Rules, 2004 was crucial. Before the omission of the Explanation to this definition, one appellant's period of dispute fell, making them ineligible for claiming the benefit of the Explanation due to providing a taxable service concurrently. The other appellant's CENVAT credit utilization post-omission was contested. Arguments were made regarding the purpose of the Explanation's omission and the definition of a provider of taxable service under Rule 2(r).

3. The omission of the Explanation to the definition of "output service" was significant. The contention that the Explanation's omission was inconsequential due to its implicit nature was debated. The impact of this omission on the appellants' eligibility to use CENVAT credit for paying Service Tax on GTA service was a key point of discussion.

4. The consideration of the appellants as providers of taxable service under Rule 2(r) was debated. One appellant's provision of a taxable service during the relevant period affected their eligibility. The argument regarding liability for paying Service Tax on GTA service and its connection to being a provider of taxable service was analyzed. The relevance of the definition of "provider of taxable service" in light of the Explanation's omission was a critical aspect of the judgment.

In conclusion, the appellants were directed to pre-deposit 50% of the respective duty amounts within a specified timeline. The judgment highlighted the complexities surrounding the use of CENVAT credit for paying Service Tax on GTA service and the interpretation of relevant provisions under the CENVAT Credit Rules, 2004.