2007 (9) TMI 195 - AT - Service Tax

Period in question prior to amendment to definition of output service u/r 2(p) assessee is entitled to utilize the in respect of input service towards payment of service tax on GTA services freight deemed as output service for recipient of service during impugned period

Summary

Issues:
1. Eligibility of utilizing Cenvat credit for payment of Service Tax on Transport of Goods by Road Services.
2. Interpretation of Circular No. 345/4/2005-TRU in relation to the definition of "output services" pre-amendment.
3. Consistency of Tribunal decisions regarding the utilization of Cenvat credit for payment of Service Tax.

Issue 1:
The appellants, registered for Service Tax on Transport of Goods by Road Services, were challenged by the Original authority for recovery of Service Tax, contending ineligibility for Cenvat credit on Service Tax and Education Cess on GTA Services. The Commissioner (Appeals) analyzed the dispute, focusing on whether the appellants, as recipients of goods transport services, could use credit of Service Tax paid for payment of Service Tax on Goods Transport Service. The Commissioner emphasized that availing credit on Goods Transport input services and utilizing it for paying duty on deemed Goods Transport output services or on manufactured goods was permissible. The Circular No. 345/4/2005-TRU clarified that recipients of taxable services, not providing output services, were not entitled to avail credit of Service Tax paid. The Commissioner concluded that the appellants, manufacturing dutiable goods, could use the credit for paying duty on Goods Transport Services or on manufactured goods, as there was no one-to-one correlation between credit availed and utilized.

Issue 2:
The Revenue contended that the Board's Circular No. 345/4/2005-TRU, dated 3-10-2005, was amended concerning the definition of "output services" pre-amendment, thus challenging the appellants' eligibility to utilize Service Tax paid on Inward Freight as input services under Rule 3 of the Cenvat Credit Rules, 2004. However, the Tribunal noted that the period in question was prior to the amendment, and cited cases where it was upheld that Service Tax could be paid from Cenvat credit. The Tribunal referenced rulings from its Delhi and Chennai Benches, where it was held that credit could be utilized for Service Tax payment. Consequently, the Tribunal rejected the Revenue's appeal and allowed the party's appeal, aligning with the Commissioner's (Appeals) order based on the precedent set by the cited judgments.

Issue 3:
The Tribunal observed consistency in its decisions across different benches regarding the utilization of Cenvat credit for payment of Service Tax. Citing cases where the Tribunal upheld the assessee's view, the Tribunal rejected the Revenue's appeal and allowed the party's appeal based on the settled issue in favor of the assessee. The Tribunal found no merit in the Revenue's appeals and accordingly rejected them, affirming the correctness of the Commissioner's (Appeals) order in line with the established jurisprudence.