2010 (5) TMI 372 - AT - Service Tax

Waiver of pre-deposit - appellant availed Cenvat credit of service tax paid on input services - input service used in GTA service - Held that - The service tax on the GTA service is required to be paid by the service receiver only in terms of the Notification issued under Section 68(2) of the Finance Act 1994 read with Rule 2(1)(d)(v) of Service Tax Rules and just because the service recipient is required to pay service tax on GTA service this service which is actually provided by the Goods Transport Agent cannot become the output service of the service receiver - Appellants are directed to pay part of the amount - requirement of pre-deposit of remaining service tax demand interest and penalty shall stand waived and recovery thereof stayed

Summary

Issues:
Waiver from pre-deposit of service tax demand and penalty upheld by Commissioner (Appeals).

Analysis:
The case involves an application for waiver from the pre-deposit requirement of service tax demand and penalty upheld by the Commissioner (Appeals). The Appellants, engaged in manufacturing excisable goods, availed Cenvat credit of Central Excise Duty and service tax paid on input services, including GTA service. The Department alleged that the Appellants paid service tax on GTA service through Cenvat credit instead of cash, contrary to Cenvat Credit Rules, as the service was not considered their "output service." A show cause notice was issued for recovery of the unpaid service tax, interest, and penalty. The Asstt. Commissioner confirmed the service tax demand under Section 73 and imposed a penalty under Section 77 for not filing the service tax return on time. The Commissioner (Appeals) upheld this decision, leading to the present appeal and stay application.

Upon hearing arguments, it was noted that the service tax on GTA service should be paid in cash by the service receiver, not through Cenvat credit, as clarified in a Board's Circular. The service recipient cannot be considered the service provider, and the GTA service cannot be deemed the output service of the service receiver. Despite the issue being pending before a Larger Bench, the Tribunal agreed with the Board's circular and directed the Appellants to pay Rs. 60,000 within eight weeks. Upon compliance, the pre-deposit requirement for the remaining service tax demand, interest, and penalty was waived, and recovery stayed.

In conclusion, the Tribunal found that the Appellants were required to pay the service tax on GTA service in cash, not through Cenvat credit, as the service was not their output service. The decision was based on the Board's circular and the understanding that the service receiver cannot be considered the service provider in this context. The Appellants were directed to make a partial payment, and upon compliance, the pre-deposit requirement for the remaining amount was waived, and recovery stayed.