2019 (3) TMI 514 - AT - Central Excise

Utilization of CENVAT credit - carriage inward - financial year 2007-08 to 2009-10 - Whether a manufacturer having credit balance in his account can utilize that credit for payment of Service Tax on goods transport by road? - Rule 3 (4) of CCR - time limitation - scope of SCN - Held that - CENVAT Credit can be utilized for payment of Service Tax on any output service - Thus, the reasoning of the adjudicating authority that since GTA do not qualify to be an output service as such is not eligible for Cenvat Credit. Hence payment of Service Tax thereof cannot be made from the accumulated Cenvat Credit is opined as incorrect. Though there are several other proviso attached to this sub-rule (4) but none of those provisos are applicable to the given situation. There is an explanation that CENVAT credit cannot be utilized for payment of service tax in respect of services where the person liable to pay tax is the service recipient. But this explanation got incorporated in this Rule vide Notification No.28 dated 20th June, 2012 with effect from 1st July, 2012. The period here is 2007-08 to 2009-10. Hence, the explanation cannot be made retrospectively applicable to the impugned period for which the above condition holds a good law that cenvat credit may be utilized for payment of Service Tax on any output service (including GTA service). Extended period of limitation - Held that - Discharging the liability by utilizing the cenvat credit is otherwise a situation of Revenue neutrality, due to which, no mala fide can be attributed to the appellant that there was an intention to cause a loss to Government Exchequer - Department was not entitled to invoke the extended period of limitation. Scope of SCN - Held that - The order under challenge has gone beyond the scope of show cause notice by confirming the demand till December, 2010, despite that, it was proposed till 31st December, 2009. In the light of entire above discussion, the order under challenge is held not sustainable. Appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Interpretation of Cenvat Credit Rules for payment of Service Tax on goods transport by road.
2. Applicability of Circular No.7/2008 dated 23.08.2007 in determining liability.
3. Validity of demand raised beyond the normal period of limitation.

Analysis:

Issue 1: Interpretation of Cenvat Credit Rules
The case involved a dispute regarding the utilization of Cenvat Credit for paying Service Tax on goods transport by road. The appellant argued that the Circular dated 23.08.2007 should not restrict payments made before its issuance. The Tribunal analyzed Rule 3(4) of the Cenvat Credit Rules and concluded that Cenvat Credit can be used for payment of Service Tax on any output service. The adjudicating authority's reasoning that goods transport agency services do not qualify as an output service and thus are not eligible for Cenvat Credit was deemed incorrect. The Tribunal referenced a High Court case to support the permissibility of paying Service Tax from Cenvat Account for GTA services.

Issue 2: Applicability of Circular No.7/2008
The Department relied on Circular No.7/2008 to support its position that Service Tax on transportation of goods by road cannot be paid through accumulated credit. However, the Tribunal found that this Circular did not restrict the use of Cenvat Credit for such payments, as per the Cenvat Credit Rules. The Tribunal highlighted that the Circular's content pertained to procedural issues and did not impose a bar on utilizing Cenvat Credit for Service Tax payments on output services.

Issue 3: Demand raised beyond the limitation period
The appellant contended that the demand raised beyond the normal period of limitation was not sustainable. The Tribunal agreed, stating that the show cause notice proposing the demand up to 31.12.2009 could not be extended to December 2010 without proper justification. As the demand was beyond the normal limitation period, the Tribunal held that the show cause notice was time-barred and set aside the order confirming the demand till December 2010.

In conclusion, the Tribunal allowed the appeal, finding that the appellant had discharged the service tax liability using Cenvat Credit, maintaining revenue neutrality and lacking any intent to evade payment. The order was set aside as unsustainable due to exceeding the scope of the show cause notice and being time-barred.