2009 (6) TMI 44 - AT - Service Tax

Cenvat Credit of Service Tax paid on GTA Service - during the material time when the Explanation interpreted by the Tribunal was in force, GTA service in respect of which the appellants was held liable to pay tax and paid service tax has to be held as output service - an assessee is allowed to use CENVAT credit, inter alia, for discharging tax liability on output service.

Summary

Issues:
1. Utilization of CENVAT credit for payment of service tax on GTA service.
2. Interpretation of output service in relation to GTA service.
3. Consistency of impugned order with legal provisions.

Analysis:
1. The appellants, a manufacturer of cotton yarn registered with the Service Tax Department under the GTA service, paid service tax amounting to Rs.2,05,116/- for freight on transportation of goods to their factory from February 2005 to April 2006 using CENVAT credit. The impugned order demanded the service tax payment, stating that CENVAT credit could not be used for input services. The appellants contested this, citing a Tribunal decision in India Cements Ltd. Vs. CCE, Salem, which held that a person liable to pay service tax on a service not provided by them should be considered as rendering output service. They argued that they should be allowed to use CENVAT credit for such service tax payments based on this interpretation.

2. The Tribunal, after considering the arguments and the conflicting decision in Alstom Projects India Ltd. Vs. CCE, held that during the relevant period, GTA service for which the appellants paid service tax should be considered as output service. The Division Bench's binding decision established that CENVAT credit could be used to discharge tax liability on output service. Therefore, the impugned order was deemed unsustainable in law, and the appeal was allowed in favor of the appellants.

3. The judgment highlights the importance of interpreting the concept of output service in the context of service tax liability and the utilization of CENVAT credit. It clarifies the applicability of CENVAT credit for payment of service tax on GTA service and emphasizes the need for consistency with legal provisions and binding decisions of the Tribunal. The decision provides clarity on the treatment of service tax liabilities and the permissible use of CENVAT credit, ensuring compliance with the law and upholding the rights of the appellants in this case.