2008 (8) TMI 88 - AT - Service Tax

Whether recipient of the taxable service, namely GTA service, is entitled to utilize cenvat credit for paying service tax on an output service - As per explanation to rule 2(p) of CCR, service for which he was liable to service tax must be treated to be an output service , & that being the legal position, the appellant was entitled to utilize the cenvat credit for payment of service tax on such service assessee s appeal is allowed

Summary

Issues:
Utilization of cenvat credit by the appellant for the period from January to September 2005 in relation to the goods transport agency (GTA) service.

Analysis:
The appeal was filed by the assessee against the order-in-appeal of the Commissioner of Central Excise dated 28.11.2007, which upheld the order-in-original of the Assistant Commissioner dated 27.6.2007. The main issue in question was whether the appellant, as a recipient of the GTA service, could utilize the cenvat credit for payment of service tax. The appellant argued that the recipient of the taxable service, such as the GTA service, was entitled to utilize cenvat credit for paying service tax on an 'output service'. The appellant cited various precedents to support this argument, including the decisions in Bhushan Power & Steel Limited vs. Commr. of C.Ex. Cus. & Service tax, CCE vs. Nahar Industrial Enterprises Ltd., and Andhra Pradesh Paper Mills Ltd., vs. CCE, Visakhapatnam-II.

The Tribunal examined the relevant provisions of the Cenvat Credit Rules 2004, specifically rule 3(4)(e), which allows cenvat credit to be utilized for payment of service tax on output service. The term 'output service' was defined in clause (p) of rule 2 of the Rules. The explanation provided clarified that if a person liable for paying service tax does not provide any taxable service, the service tax for which he is liable to pay shall be deemed to be the output service. The term 'person liable for paying service tax' was also defined, particularly in the context of taxable service provided by a goods transport agency. It was established that the appellant, being a dealer of excisable goods and liable to pay freight for the transportation of goods, was the person liable to pay service tax. Therefore, the service for which the appellant was liable to service tax must be treated as an 'output service', allowing the appellant to utilize the cenvat credit for payment of service tax on such service.

Based on the above analysis and legal interpretation, the Tribunal allowed the appeal, setting aside the impugned orders of the authorities below. The judgment was pronounced in the open Court on 18.08.2008.