2015 (9) TMI 1217 - HC - Service Tax

Denial of CENVAT Credit - Goods Transport Agency services - contravention of Rule 3 (4) of the Cenvat Credit Rules - Held that - The decision relied on by the Tribunal in R.R.D. Tex case (2007 (5) TMI 84 - CESTAT, CHENNAI), was also upheld by this Court in Commissioner - Vs - R.R.D. Tex Pvt. Ltd. (2013 (7) TMI 920 - MADRAS HIGH COURT). - A cursory reading of the above orders clearly reveal that the decision is squarely applicable to the facts of the present case. Following the same, the substantial questions of law are answered in favour of the assessee and against the Revenue. - Decided against Revenue.

Summary

Issues:
1. Whether the Tribunal was correct in allowing the utilization of Cenvat Credit for service tax on Goods Transport Agency services?
2. Can Goods Transport Agency services be considered both 'output service' and 'input service' under the Cenvat Credit Rules?

Analysis:
Issue 1:
The Department challenged the Tribunal's decision allowing the utilization of Cenvat Credit for service tax on Goods Transport Agency (GTA) services. The Department argued that this contravened Rule 3(4) of the Cenvat Credit Rules, 2004, as GTA services were not considered output services. A show cause notice was issued proposing recovery of the unauthorized credit, interest, and penalty. The Deputy Commissioner confirmed the demand and imposed penalties. The Commissioner (Appeals) upheld this decision, leading the assessee to appeal to the Tribunal, which favored the assessee based on previous decisions. The High Court noted that the issue had been addressed in a previous case, where it was held that the recipient of GTA services could use Cenvat credit to pay service tax, as per Rule 2(l) and 2(p) of the Cenvat Credit Rules.

Issue 2:
Regarding whether GTA services could be classified as both 'output service' and 'input service,' the High Court referred to a previous case involving a yarn manufacturer. The Court explained that the recipient of GTA services, by virtue of the Explanation to Rule 2(p) of the Cenvat Credit Rules, was considered a provider of output service and entitled to benefits similar to a provider of input service. The Court clarified that Rule 2(l) and 2(p) covered different situations, allowing the recipient of taxable service to use Cenvat credit to discharge their service tax liability. The Court upheld the Tribunal's decision based on this interpretation and previous rulings, dismissing the Department's appeals and affirming the Tribunal's orders without costs. The judgment emphasized the consistent application of legal principles in similar cases.