2016 (4) TMI 153 - AT - Service Tax

Eligibility for Cenvat credit of the service tax paid by the provider of service (GTA) - Service tax not deposited and the same have been paid by the GTA - Held that - the words in respect of such taxable service as may be notified , have been inserted in subsection 2 of Section 68 with effect from 1/7/2012 by the finance act 2012. Thus prior to 1/7/2012, under the provisions of section 68 (1), the tax already has been deposited by the GTA in the present case. Also Rule 2(1)(d)(v) of service tax rules does not override the provisions of the Act. Moreover it has been clarified by CBEC in circular number 97/8/2007 - ST dated 23/8/2007 - clarifying that service tax may be paid either by the consignee or by the consignor or by the GTA, where the consignee is a manufacturer and the service in question is input service for them, in such case manufacturer would be eligible to take the Cenvat credit of the same. Accordingly the appellant have taken Cenvat credit in accordance with law. Further, invoice is a prescribed document under rule 9(1) (f) of Cenvat credit rules 2004 on which credit can be taken. Accordingly, the impugned order is set aside. - Decided in favour of appellant with consequential benefit

Summary

Issues:
1. Liability of a manufacturer to pay service tax as a recipient of service and entitlement to Cenvat credit.
2. Interpretation of Rule 2(1)(d)(v) of service tax rules and Rule 9 of Cenvat Credit Rules.
3. Precedent rulings on the liability of the manufacturer to pay service tax.
4. Application of Circular 97/8/2007 - ST regarding payment of service tax by consignee, consignor, or GTA.

Analysis:
1. The appellant challenged an order holding them liable to pay service tax as a manufacturer and rejecting their entitlement to Cenvat credit for service tax paid by the service provider - GTA. The issue revolved around the interpretation of Rule 2(1)(d)(v) of service tax rules and Rule 9(1)(e) of Cenvat credit rules, 2004, which govern the eligibility for Cenvat credit based on the payment of service tax by the person liable.

2. The Tribunal considered the provisions of Section 68 of the Act, emphasizing the obligation of the person providing taxable service to pay service tax. It was noted that prior to 1/7/2012, the tax had already been deposited by the GTA, as clarified by Circular 97/8/2007 - ST. The Tribunal held that Rule 2(1)(d)(v) of service tax rules does not override the Act and that the appellant had correctly taken Cenvat credit in compliance with the law, as the invoice is a prescribed document under Rule 9(1)(f) of Cenvat credit rules 2004.

3. The appellant relied on precedent rulings such as Navyug Alloys (P) Ltd. Vs. CCE 2008 and Umasons Auto Compo Private Ltd Vs. Commissioner of Central Excise & Customs, where it was established that once service tax is paid by the service provider, it cannot be demanded again from the recipient of the service. The Tribunal upheld these precedents, emphasizing the prima facie liability of the service provider to pay service tax and the eligibility of the recipient to take Cenvat credit if the tax has been paid.

4. The Tribunal considered the arguments of the revenue, emphasizing the requirements under Rule 9 of the Cenvat Credit Rules regarding the possession of Challan and bills for availing Cenvat credit. However, based on the interpretation of relevant provisions and precedents, the Tribunal set aside the impugned order, allowing the appeal and granting the appellant consequential benefits in accordance with the law.