2015 (7) TMI 430 - AT - Service Tax

Goods Transport Agency service - availing benefit of Notification No. 32/2004-ST - Whether GTA have utilized the CENVAT Credit - Held that - as per Rule 2(r) of Cenvat Credit Rules 2004, provider of taxable service includes person liable for paying service tax . As the appellant was liable to pay service tax on GTA service it became provider of the said GTA service. In terms of Rule 2(p) of the said Rules (as it stood during the relevant period) output service means any service provided by provider of taxable service. So GTA service became the appellant s output service and therefore payment of service tax thereon by utilising Cenvat credit was clearly in accordance with provisions of Rule 3(4) of Cenvat Credit Rules 2004 which inter alia provides that Cenvat credit may be utilised for payment of service tax on any output service. It is not the case of Revenue that GTA service was not an input service for the appellant in terms of Rule 2(1) of Cenvat Credit Rules. Therefore the service tax paid by them under GTA service was available to them as Cenvat Credit. Seen in this light, the observation of the adjudicating authority in para 14.2 of the impugned order that the appellant intentionally prepared the bills in terms of Rule 4A of the Service Tax Rules 1994 and debited the amount from the Cenvat credit account in spite of the admitted fact that they were not the provider of any output service and that they prepared the said bills just for the purpose of creating papers to show the payment of service tax and to take the credit of such tax which was otherwise not admissible to them is devoid of any legal basis. Thus, the demand of ₹ 1,17,75,703/- is not sustainable. The stipulated declaration was stamped by the appellant on the invoices and all the goods transport agencies have given in writing that they had permitted the appellant to do so. They have also affirmed that they had not taken any Cenvat credit or the benefit of Notification No. 12/2003-ST. These GTA service providers were not even registered with the Service Tax department. - appellant had correctly availed of the benefit of Notification No. 32/2004-ST and there is no legal basis to deny the said benefit. Consequently the demand of ₹ 6,75,96,097/- under GTA service is clearly unsustainable - impugned demand is not found to be sustainable.

Summary

Issues:
1. Confirmation of service tax demand and disallowance of Cenvat credit.
2. Dispute over the appellant's status as a Goods Transport Agency (GTA) service provider.
3. Validity of utilizing Cenvat credit for payment under reverse charge mechanism.
4. Compliance with Notification No. 32/2004 regarding service tax payment on GTA service.

Analysis:

1. The appellant, a manufacturer of iron and steel products, filed an appeal against the confirmation of a service tax demand of Rs. 6,75,96,097/- along with disallowance of Cenvat credit amounting to Rs. 1,17,75,703/-. The dispute arose as the appellant paid service tax on GTA service using Cenvat credit based on its own invoices, which the adjudicating authority deemed irregular. Additionally, the appellant wrongly availed the benefit of a notification, leading to the demand confirmation.

2. The appellant argued that under the reverse charge mechanism, it became the GTA service provider as per Rule 2(r) of Cenvat Credit Rules, 2004. The appellant cited various judgments to support its contention that GTA service was its input service, justifying the credit of service tax paid. The appellant also emphasized that the transporters were unregistered, negating the need for Cenvat credit or Notification No. 12/2003-ST.

3. The Tribunal analyzed the Cenvat Credit Rules, 2004, and concluded that the appellant, being liable to pay service tax on GTA service, was considered the provider of such service. Utilizing Cenvat credit for service tax payment on output service was deemed lawful. Judicial precedents supported the appellant's position, highlighting that the demand for disallowed Cenvat credit was unsustainable.

4. Regarding the demand under Notification No. 32/2004 for service tax payment on GTA service, the Tribunal found that the appellant had complied with the conditions of the notification. The requirement for declarations on invoices was not mandated by the notification itself but by executive instructions. The appellant's actions, including obtaining declarations from transport agencies, aligned with legal precedents, indicating the correct availing of benefits under the notification.

In conclusion, the Tribunal ruled in favor of the appellant, deeming the impugned demand unsustainable and allowed the appeal. The judgment highlighted the legal basis for the appellant's contentions, emphasizing compliance with relevant rules and notifications in the service tax dispute.