2009 (12) TMI 381 - AT - Service Tax

Stay- Cenvat Credit- The appellants are engaged in the manufacture of filament yarn. During the period from October, 2006 to September, 2007, the appellants availed GTA services in respect of transport of inputs to their factory and for payment of service tax as recipient of GTA services, they utilized the Cenvat credit to the extent of Rs. 6,53,601/-. Revenue s case that since GTA service received by appellant, manufacturer is not their output service, tax liability on impugned service not to be discharged through cenvat credit. Held that- issue stands referred to Larger Bench but not a case for total waiver of pre-deposit. Appellant directed to pay Rs. 4 lakh as pre-deposit. Pre-deposit of balance amount waived recovery stayed.

Summary

Issues:
Application for waiver from pre-deposit of service tax demand upheld by Commissioner (Appeals).

Analysis:
The appeal involved a dispute regarding the payment of service tax by utilizing Cenvat credit for GTA services received by the appellant. The Commissioner (Appeals) upheld the service tax demand but set aside the penalty under Section 76 of the Finance Act, 1994. The appellant contended that prior to the amendment in March 2008, GTA services received and service tax paid as a recipient qualified as output service. The appellant cited precedents like ITC Ltd. v. CCE, Guntur and Pragati Papers Industries Ltd. v. C.C.E., Chandigarh to support their argument. On the other hand, the Department argued that during the disputed period, GTA services received could not be considered output service as per the definition in Rule 2(p) of the Cenvat Credit Rules, 2004. The Department highlighted that the definition of output service required the actual provision of taxable service by the service provider. The Tribunal, after considering both sides, found that the service tax on GTA services received could not be discharged through Cenvat credit as it did not qualify as output service. The Tribunal referred to a Board Circular clarifying that the consignee being made liable to pay service tax did not transform the received service into output service. Therefore, the Tribunal directed the appellant to pay a specific amount within a stipulated period, failing which the remaining service tax demand would be waived, and recovery stayed until the appeal's disposal. Compliance was to be reported by a specified date.

This detailed analysis of the judgment highlights the key arguments presented by both sides, the legal interpretation of the definition of output service, and the Tribunal's decision regarding the payment of service tax using Cenvat credit for GTA services received.