2008 (10) TMI 166 - AT - Service Tax

Applicants are registered as Scientific and Technical Consultancy service provider and also provider of goods transport service - applicants availed the credit of service tax paid in respect of goods transport service and utilized the same towards discharging the liability of service tax in respect of Scientific and Technical Consultancy service - applicant paid service tax on transportation of goods which were supplied to M/s. ICI India Ltd. for manufacture of goods. Therefore, service tax paid on input service is not for providing the service of Technical Consultancy Service stay granted partly

Summary

Issues: Application for waiver of pre-deposit of tax and penalty based on the denial of credit of input service.

The judgment pertains to an application for the waiver of pre-deposit of tax and penalty amounting to Rs. 1,38,350. The applicant, a provider of Scientific and Technical Consultancy service and goods transport service, availed credit of service tax paid for goods transport to offset the tax liability for consultancy services. The revenue contended that the service tax paid for goods transport is not linked to providing consultancy services, citing the definition of 'input service' under the Cenvat Credit Rules. The Tribunal analyzed the situation and found that the service tax paid on goods transport, utilized for manufacturing goods, does not qualify as an input service for consultancy services. Consequently, the Tribunal directed the applicant to deposit Rs. 75,000 within eight weeks, with the remaining tax and penalty waived upon this deposit. The case was scheduled for compliance reporting on 16-12-08.

In this judgment, the primary issue was whether the service tax paid on goods transport service, utilized for manufacturing goods, could be considered an input service for the purpose of availing credit towards the liability of Scientific and Technical Consultancy service. The Tribunal examined the definition of 'input service' under the Cenvat Credit Rules, which states that it must be a service used by a provider of taxable service for providing an output service. The Tribunal concluded that the service tax paid on goods transport, which was not directly related to providing consultancy services, did not meet the criteria of an input service. Therefore, the Tribunal found that total waiver of service tax was not warranted in this case.

The judgment highlights the importance of understanding the specific definitions and criteria laid out in tax laws, such as the Cenvat Credit Rules, to determine the eligibility of availing credits for tax liabilities. It underscores the need for a direct nexus between the input service and the output service provided by the taxpayer to qualify for such benefits. The decision also showcases the Tribunal's role in interpreting and applying legal provisions to resolve disputes related to tax liabilities and credits in a fair and just manner.