2018 (8) TMI 1101 - AT - Service Tax

Utilization of CENVAT Credit - Whether the appellant is entitled to discharge the service tax on reverse charge mechanism in respect of GTA services by utilizing Cenvat credit? Held that - As per Rule 2(r), the person liable to pay service tax is a deemed service provider - In the present case, the appellant is paying service tax on reverse charge mechanism of GTA service. Since, statutorily, the appellant is required to pay service tax, therefore, he is deemed service provider. Consequently, the GTA service for the appellant, is a deemed output service. Accordingly, they are entitled for utilization of Cenvat credit for payment of service tax on GTA. After insertion of the bar, i.e. from 01.07.2012, the appellant was not entitled to utilize Cenvat credit for payment of service tax in respect of GTA service. However, prior to this date, utilization of credit is correct. Appeal allowed in part.

Summary

Issues:
- Whether the appellant is entitled to discharge the service tax on reverse charge mechanism in respect of GTA services by utilizing Cenvat credit.

Analysis:
The judgment by the Appellate Tribunal CESTAT Ahmedabad addressed the issue of whether the appellant could utilize Cenvat credit to discharge service tax on reverse charge mechanism for GTA services. The appellant did not appear during the proceedings. The Deputy Commissioner representing the Revenue argued that Cenvat credit could only be used for payment of service tax on output services, while GTA services were considered input services for the appellant. He highlighted a specific amendment in the Cenvat Credit Rules, effective from 01.07.2012, which prohibited the utilization of Cenvat credit for service tax on reverse charge mechanism. The Deputy Commissioner contended that this amendment had a retrospective effect for the period in question.

Upon careful consideration, the Tribunal found that as per Rule 2(r), the appellant, being liable to pay service tax on reverse charge mechanism for GTA services, was deemed a service provider. Consequently, GTA services for the appellant were deemed output services, entitling them to utilize Cenvat credit for service tax payment on GTA. An explanation inserted in sub Rule 4 of Rule 3 clarified that Cenvat credit could not be used for service tax payment where the person liable to pay tax was the service recipient. The Tribunal noted that this clarification imposed a specific bar on Cenvat credit utilization when the service recipient was liable to pay service tax, effective from 01.07.2012. Therefore, the appellant was not entitled to utilize Cenvat credit for GTA service tax payment from that date onwards. However, the Tribunal allowed the utilization of credit before this amendment date. Consequently, the impugned order was set aside to that extent, and the demand from 01.07.2012 onwards was upheld.

In conclusion, the Tribunal modified the impugned order, partially allowing the appeal and upholding the demand from 01.07.2012 onwards. The judgment provided a detailed analysis of the Cenvat credit rules and their application to service tax payment on reverse charge mechanism for GTA services, clarifying the entitlement and limitations on credit utilization based on statutory provisions and amendments.