2008 (3) TMI 144 - AT - Service Tax

Availability of credit of manufacturing activity for utilization towards payment of Service Tax on Goods Transport Agency service - GTA Service so received by the appellants would have been covered under definition of input service u/r 2(p) CCR, so it shall be deemed to be output service - therefore, they were entitled to utilize credit of the tax paid on the input GTA service (availed by them in connection with receipt of inputs into their factory), for payment of tax on such service

Summary

Issues involved: Availability of Cenvat credit of manufacturing activity for utilization towards payment of Service Tax on Goods Transport Agency service.

Analysis:
The issue in this appeal pertains to the availability of Cenvat credit of manufacturing activity for the payment of Service Tax on Goods Transport Agency (GTA) service. The Tribunal referred to several previous decisions where it was held in favor of the respondents, citing cases such as Commissioner of Central Excise, Chandigarh vs. Nahar Industrial Enterprises Ltd., India Cements Ltd. vs. CCE, Salem, R.R.D. Tex Pvt. Ltd. vs. CCE, Salem, and Commissioner of Central Excise, Nagpur vs. Visaka Industries Ltd. The Tribunal specifically highlighted the case of India Cement Ltd., where it was noted that the appellants did not provide any taxable service but were liable to pay service tax on GTA Service received by them. The Explanation to the definition of "output service" under Rule 2(p) was crucial in this context. It clarified that even if a person liable for paying service tax does not provide any taxable service but manufactures final products, the service for which service tax is due shall be deemed to be the output service. This meant that the appellants, by paying service tax on GTA Service for the removal of their final product from the factory, were essentially paying for an "output service" and were entitled to utilize the credit of tax paid on the input GTA service for payment. The Tribunal set aside the demand of service tax and the penalty imposed, ultimately allowing the appeal.

In light of the aforementioned decisions and the interpretation of the relevant rules and explanations, the Tribunal found no reason to interfere with the order of the Commissioner (Appeals). Consequently, the appeal filed by the Revenue was rejected. The judgment was dictated and pronounced in open court, bringing the matter to a close.