2009 (11) TMI 202 - AT - Service Tax

Cenvat Credit- The appellants herein are engaged in the manufacture of pneumatic tyres , availing credit of duty paid on inputs and capital goods and service tax paid on input services. During the period Mar. 05 to Jan. 06, they had paid service tax of Rs. 2,52,476 through debit in their CENVAT credit account of inputs and capital goods as they were persons liable to pay service tax on GTA services received by them for transportation of inputs and capital goods and outward transportation of their finished goods up to their depot (place of removal). The said amount of service tax paid was taken as input service tax credit. Show-cause notice was issued proposing recovery of the credit amount on the ground that payment through CENVAT debit instead of cash payment was in contravention of rule 3(4) of the CENVAT Credit Rules, 2004 and that the amount of credit had been availed without the challan evidencing payment of the tax amount. The adjudicating authority confirmed the demand together with interest and also imposed penalty. The lower appellate authority upheld the adjudication order; hence this appeal. In the light of the various decisions, held that- set aside the impugned order and allow the appeal.

Summary

Issues:
1. Availing credit of duty paid on inputs and service tax on input services.
2. Contravention of rule 3(4) of the CENVAT Credit Rules, 2004.
3. Recovery of credit amount without challan evidencing payment.
4. Imposition of penalty under rules 15 and 26 of the said Rules.

Analysis:

1. The appellants were involved in the manufacture of 'pneumatic tyres' and had paid service tax through debit in their CENVAT credit account for GTA services. The issue was regarding the recovery of the credit amount due to the payment method used and the absence of challan evidencing the tax payment. The lower authorities confirmed the demand and imposed a penalty. However, the Tribunal referred to previous decisions in India Cements Ltd. and R.R.D. Tex (P.) Ltd. cases, where it was established that the assessees were entitled to utilize credit of tax paid on input GTA service for payment of service tax. The Tribunal relied on the Explanation under rule 2(p) of the CENVAT Credit Rules, 2004, which defined "output service," to support the assessees' position.

2. The Tribunal highlighted the conflicting views presented in the case of Alstom Projects India Ltd. v. CCE and the subsequent resolution in Thiyagarajar Mills Ltd. v. CCE. The decision in India Cements Ltd.'s case was deemed binding during the material time, as per the Final Order No. 766/2009. The Tribunal emphasized the necessity to follow the Division Bench's decision in India Cements Ltd.'s case, which supported the assessees' claim that they were entitled to utilize credit of tax paid on input GTA service.

3. In light of the Division Bench's decision in India Cements Ltd.'s case, the Tribunal set aside the impugned order and allowed the appeal in favor of the appellants. The Tribunal's ruling was based on the established interpretation of the CENVAT Credit Rules and the entitlement of the assessees to avail credit for tax paid on input GTA services. The decision provided clarity on the issue and upheld the assessees' right to utilize the credit for service tax payment.

This comprehensive analysis of the judgment outlines the key issues involved, the legal interpretations applied, and the final decision rendered by the Tribunal in favor of the appellants based on established precedents and interpretations of the relevant rules.