2007 (3) TMI 201 - AT - Service Tax

Credit - Assessee, manufacturer as well as output put service provider - Section 68(2) of Finance Act - output service means any taxable service provided by the provider of service to a customer, client & a person liable to pay Service Tax & provider of taxable service include a person liable for paying Service Tax held that as per the CCR and as per Manual, there is no restriction for utilization of credit by the manufacturing unit towards payment of Service Tax as service tax provider

Summary

Issues:
- Eligibility of output service provider to avail Cenvat credit for utilization towards payment of Service Tax.
- Interpretation of Cenvat Credit Rules, 2004 regarding dual role of manufacturer and service provider.
- Restrictions on utilization of Cenvat credit under CBEC Excise Manual.

Analysis:

1. Eligibility of Output Service Provider for Cenvat Credit:
The appeal challenged the Commissioner (Appeals) order allowing the respondents, engaged in manufacturing and output services, to avail Cenvat credit for payment of Service Tax. The Revenue contended that as the actual service provider is the transporter, the party deemed as the service provider is not entitled to Cenvat credit. The argument was based on the distinction between the actual service provider and the party deemed as the service provider under Section 68(2) of the Finance Act, 1994.

2. Interpretation of Cenvat Credit Rules for Dual Role Entities:
The party in question had a dual role as a manufacturer and service provider due to deeming provisions of the Act. The Revenue argued that while the Cenvat Credit Rules, 2004 apply to both categories, the definitions of 'inputs', 'capital goods', and 'input service' differ for manufacturers and service providers. The contention was that the Cenvat credit of manufacturing activity cannot be used for discharging Service Tax liability as a deemed service provider.

3. Restrictions on Utilization of Cenvat Credit:
The judgment referred to the CBEC Excise Manual, highlighting restrictions on the utilization of Cenvat credit for various duties. The manual specified that certain duties could only be utilized for payment of specific duties and not for Service Tax on output services. However, it was noted that there were no restrictions on the utilization of credit for duties other than those explicitly mentioned.

In conclusion, the Vice President, relying on the Cenvat Credit Rules and the absence of restrictions for utilizing Cenvat credit by manufacturing units for Service Tax payment as service providers, found no fault in the Commissioner (Appeals) order. Consequently, the appeal was dismissed, affirming the eligibility of the output service provider to avail Cenvat credit for Service Tax payment.