2018 (8) TMI 1466 - AT - Service Tax

Utilization of CENVAT Credit - CENVAT credit utilized by the assessee for paying service tax on GTA service - Rule 3(4)(e) of CCR - Held that - The issue is squarely covered by the decision of the Larger Bench of this Tribunal in the case of Panchmahal Steel Ltd. 2014 (4) TMI 490 - CESTAT AHMEDABAD , where it was held that wherein the Larger Bench has considered decisions of various High Courts and held that credit availed for manufacturing activities could be used for payment of service tax on GTA service even if input services or capital goods were not utilized for providing taxable services inasmuch as there was no bar / restriction for such utilization of CENVAT account under Rule 3(4)(e) of the CCR. There is no bar in taking credit of service tax paid on GTA service and reutilizing the same for payment of service tax - appeal allowed - decided in favor of appellant.

Summary

Issues:
- Utilization of CENVAT credit for payment of service tax on GTA service
- Interpretation of Rule 3(4)(e) of the CENVAT Credit Rules, 2004
- Validity of interest and penalty imposed by the Commissioner

Analysis:

Utilization of CENVAT credit for payment of service tax on GTA service:
The appellant, engaged in manufacturing excisable goods, utilized CENVAT credit for paying service tax on Goods Transport Agency (GTA) service. The Commissioner confirmed the demand for interest and penalty, citing irregular utilization of CENVAT credit. The appellant argued that GTA service qualifies as an output service, allowing for CENVAT credit utilization as per Rule 3(4)(e) of the CENVAT Credit Rules, 2004. The appellant relied on judicial precedents, including a Larger Bench decision, affirming the permissibility of such credit utilization. The Tribunal concurred, emphasizing that there was no legal restriction on using CENVAT credit for GTA service tax payment.

Interpretation of Rule 3(4)(e) of the CENVAT Credit Rules, 2004:
The Tribunal referenced the Larger Bench decision and High Court rulings, which clarified that Rule 3(4)(e) permits CENVAT credit utilization for service tax on any output service, including GTA service. The Tribunal highlighted that various High Courts had consistently upheld the legality of utilizing CENVAT credit for GTA service tax payment. The Tribunal concluded that the impugned order was unsustainable in law due to the absence of any prohibition on using CENVAT credit for such payments.

Validity of interest and penalty imposed by the Commissioner:
The Commissioner had confirmed the interest demand of ?12,41,715 and imposed a penalty of ?200 per day or 2% of the tax per month, as per Section 76 of the Finance Act, 1994. However, the Tribunal overturned this decision based on the interpretation of Rule 3(4)(e) and the judicial precedents cited. The Tribunal set aside the impugned order, allowing the appellant's appeal with consequential relief. The judgment highlighted that the appellant was entitled to use CENVAT credit for GTA service tax payment, rendering the interest and penalty unsustainable.

This detailed analysis of the judgment showcases the Tribunal's thorough examination of the issues raised, the legal framework governing CENVAT credit utilization, and the precedents supporting the appellant's position regarding the payment of service tax on GTA service.