2009 (7) TMI 588 - AT - Service Tax

Refund- Cenvat credit- the appellant paid duty on the GTA services availed by them out of the Modvat credit of service tax availed in respect of other services. Revenue objected to the same on the ground that service tax in respect of GTA service is required to be paid in cash only. Accordingly appellant deposited an amount of Rs.1, 90, 727/- vide Challan No. 07 dated 24-8-2005 and took credit of the same amount on 31-8-2006 in respect of payments made towards GTA service by challan dated 24-8-2005. They also took credit of the said service in their credit account. The Revenue s objection is that such suo motu credit by the appellant was not justified in as much as the procedure under Section 11B of the Act was required to be followed. Held that- Revenue should have on own allowed such correction of entries. No dispute that reversal of entries otherwise available. Thus set aside the impugned order and allow the appeal.

Summary

Issues:
1. Applicability of Modvat credit for GTA services.
2. Procedure under Section 11B of the Act for credit utilization objection by Revenue.
3. Justification of reversal of entries by the appellant.

Analysis:
1. The appellant availed Modvat credit of service tax for GTA services during April to July 2005. Revenue contended that service tax for GTA services must be paid in cash, not through credit. The appellant deposited the cash amount objected by Revenue and later took credit for the same. The Tribunal noted that the appellant had paid the service tax through credit initially and rectified the entries by paying in cash when objected by Revenue. The Tribunal deemed this correction as justifiable and found no reason to reject the appellant's claim for reversal of entries.

2. The Revenue objected to the appellant's suo motu credit claiming it should have followed the procedure under Section 11B of the Act. However, the Tribunal opined that the reversal of entries by the appellant upon objection by Revenue was a correction of entries, not a refund of tax. The Tribunal emphasized that when the appellant paid the tax in cash, the debit entries in the credit account had to be reversed. The Tribunal highlighted that the Revenue should have allowed such corrections when the tax was paid in cash, rendering the objection unsustainable. Therefore, the Tribunal set aside the impugned order and allowed the appeal in favor of the appellant.

3. The Tribunal concluded that the appellant's reversal of entries upon objection by Revenue was a necessary correction and not an unjustified suo motu action. The Tribunal emphasized the fairness in allowing the correction of entries when the tax was paid in cash and found the Revenue's objection unsustainable. Consequently, the Tribunal set aside the impugned order, allowed the appeal, and provided consequential relief to the appellant, thereby disposing of the stay petition as well. The judgment was pronounced in court on 17-7-2009 by Ms. Archana Wadhwa, Member (J) of the Appellate Tribunal CESTAT, Ahmedabad.