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2015 (1) TMI 1465 - HC - Central ExciseCENVAT Credit - output services or not - transport services availed by the Respondent and provided by a goods transport agent - utilization of Cenvat Credit for payment of Service Tax on services provided by goods transport agent - Explanation to Rule 2(p) of the Cenvat Credit Rules, 2004 - HELD THAT - It is not disputed by the learned Counsel appearing for the appellant that the Explanation was omitted in 2006; whereas the dispute under consideration is in respect of the year 2005 and, as such, the Explanation to Rule 2(p) of the said Rules would be applicable to the facts of the present case. On plain reading of the said Explanation, as it is not disputed that the respondents are paying service tax, the services rendered by the respondents on that count are deemed to be output service as the other conditions therein are satisfied. On perusal of the order passed by the Commissioner (Appeals), Central Excise Customs, Goa, dated 16th March, 2007, it is seen that the Commissioner has taken a view that as per Explanation to Rule 2(p) of the Cenvat Credit Rules if a person liable for payment of service tax does not provide any taxable service, the service for which he is liable to pay service tax shall be deemed to be the output service. The Commissioner has further found that on harmonious reading of various rules of Cenvat Credit Rules and Service Tax Rules, it is clear that Cenvat Credit can be utilized for payment of Service Tax liability in respect of goods transport agent. Appeal dismissed.
Issues:
1. Interpretation of the term 'output service' under Rule 2(p) of the Cenvat Credit Rules, 2004. 2. Validity of utilizing Cenvat Credit for payment of Service Tax on services provided by goods transport agents. Issue 1: Interpretation of the term 'output service' under Rule 2(p) of the Cenvat Credit Rules, 2004: The appeal raised substantial questions of law regarding whether the transport services availed and provided by a goods transport agent fall within the definition of 'output service' as per Rule 2(p) and Rule 4(e) of the Cenvat Credit Rules, 2004. The appellant argued that the respondents are not entitled to credit as they do not provide any output service, emphasizing that the activities carried out do not meet the criteria of 'output service' as defined. On the other hand, the respondent contended that they pay service tax for the services rendered, and the Explanation to Rule 2(p) supports their entitlement to credit. The Tribunal's decision was based on a judgment from the Principal Bench, New Delhi, supporting the respondent's position. The High Court analyzed the relevant rules and the Explanation, concluding that the services rendered by the respondents are deemed to be 'output service' as they pay service tax, thereby upholding the Tribunal's decision and the Commissioner's findings. Issue 2: Validity of utilizing Cenvat Credit for payment of Service Tax on services provided by goods transport agents: The High Court examined the provisions of the Cenvat Credit Rules and the Service Tax Rules to determine whether Cenvat Credit can be used for the payment of Service Tax liability in the case of goods transport agents. The Commissioner had previously ruled that the service for which a person is liable to pay service tax shall be deemed to be the output service if they do not provide any taxable service, as per the Explanation to Rule 2(p) of the Cenvat Credit Rules. The Court found no error in the Commissioner's decision, stating that Cenvat Credit can indeed be utilized for paying Service Tax in such cases. The substantial questions of law were answered accordingly, leading to the rejection of the appeal. In conclusion, the High Court upheld the Tribunal's decision, emphasizing the applicability of the Explanation to Rule 2(p) of the Cenvat Credit Rules in deeming the services provided by the respondents as 'output service' for which Cenvat Credit can be utilized for paying Service Tax.
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