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2017 (9) TMI 280 - HC - Service TaxRecovery of CENVAT credit - payment of service tax on Goods Transport Agency (GTA) under reverse charge from Cenvat Credit - Whether the appellant can be said to be Provider of any output services and is entitled for utilization of Cenvat credit in terms of Rule 3(4) of Cenvat Credit Rules, 2004 prior to amendment dated 1-3-2008? - Held that - In relation to service provided or agreed to be provided by GTA in respect of transportation of goods by road, where the person liable to pay freight is; any factory registered under or governed by the Factories Act, is such a category, any person who pays or is liable to pay freight either himself or through his agent for the transportation of such goods by road in a goods carriage is included within term person liable for paying service tax . Even after exclusion the normal term liability under Rule 2(p)(q) and (r) of Rules, 2004 read with Rule 2(i)(d) of Rules, 1994 is clearly applicable to such category of persons as are covered therein irrespective of explanation or deemed fiction therein - recovery of credit set aside - decided in favor of assessee.
Issues Involved:
1. Entitlement of the appellant to utilize Cenvat credit for payment of service tax on Goods Transport Agency (GTA) services prior to the amendment dated 1-3-2008. Issue-wise Detailed Analysis: 1. Entitlement of the appellant to utilize Cenvat credit for payment of service tax on GTA services prior to the amendment dated 1-3-2008: The core issue in this case revolves around whether the appellant, a provider of taxable services, is entitled to utilize Cenvat credit for the payment of service tax on GTA services before the amendment on 1-3-2008. The appellant, engaged in the manufacture of sugar and alcohol, utilized molasses captively and paid service tax on GTA services by availing Cenvat credit. The Tribunal initially rejected the appellant's appeal, affirming the recovery of ?4,04,179/- along with interest, citing the deletion of the Explanation under Rule 2(p) of the Cenvat Credit Rules, 2004, effective from 19-4-2006. This deletion, according to the Tribunal, implied that the appellant could no longer utilize Cenvat credit for the payment of service tax on GTA services and had to pay it in cash. However, the appellant argued that the deletion of the Explanation did not alter the substantive meaning of the terms "output service," "provider of taxable service," and "person liable for paying service tax" as defined in Rules 2(p), 2(q), and 2(r) of the Cenvat Credit Rules, 2004. The appellant contended that even after the deletion, they remained entitled to utilize Cenvat credit for the payment of service tax on GTA services. The High Court examined various precedents and interpretations by different Tribunals and High Courts. It noted that several decisions, including those from the Tribunal's Delhi, Chennai, and Mumbai Benches, supported the appellant's position. These decisions emphasized that the deletion of the Explanation did not change the legal position, and recipients of GTA services, deemed as providers of taxable services, could utilize Cenvat credit for service tax payments. The High Court also referenced judgments from the Punjab and Haryana High Court, Delhi High Court, and Himachal Pradesh High Court, which upheld the entitlement of recipients of GTA services to utilize Cenvat credit for service tax payments. These judgments highlighted that the legal fiction created under Section 68(2) of the Finance Act, 1994, deeming service recipients as service providers, should be given full effect. In conclusion, the High Court determined that the deletion of the Explanation under Rule 2(p) did not impact the appellant's entitlement to utilize Cenvat credit for the payment of service tax on GTA services. The appellant satisfied the conditions under the relevant rules and was entitled to such utilization. Judgment: The High Court allowed the appeal, setting aside the Tribunal's judgment to the extent it affirmed the recovery of the amount of Cenvat credit. The question of law was answered in favor of the appellant and against the Revenue.
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