2016 (8) TMI 354 - AT - Service Tax

Cenvat credit - GTA service reverse charge mechanism output service GTA service to be considered as output service availability of cenvat credit Held that - Goods Transport Agency services availed under clause (zzp) of clause 105 of section 65 of the Finance Act, 1994 was excluded from the purview of output services only w.e.f. 1.3.2008 by issue of Notification No. 10/2008-CE (NT). After omission of the explanation, the possibility of the services received to be considered as an output service no longer remained no penalty imposed appeal partly allowed.

Summary

Issues:
Interpretation of Rule 2(p) of the Cenvat Credit Rules regarding the definition of output services and the availability of CENVAT Credit for payment of Service Tax on Goods Transport Agency services.

Analysis:
The case involved the appellant, M/s Tytan Organics Pvt. Ltd., availing services of Goods Transport Operator and paying Service Tax on reverse charge basis using CENVAT Credit. The dispute arose when a notice was issued to deny the use of CENVAT Credit for this purpose, leading to a demand confirmed by lower authorities.

The appellant's argument was based on the interpretation of Rule 2(p) of the Cenvat Credit Rules at the material time, which defined output services as any taxable service provided by the provider. The appellant contended that Goods Transport Agency services were not excluded from output services until 1.3.2008, as per Notification No. 10/2008-CE (NT). They relied on previous decisions supporting their claim, such as India Cement Ltd. 2007 (7) STR 569 (Tri).

On the other hand, the respondent relied on cases like ITC Ltd. 2011 (23) STR 41 (Tri-Bang) to argue against the appellant's position. The Tribunal examined the conflicting decisions and the evolution of Rule 2(p) over time. It was noted that the explanation in Rule 2(p) was omitted on 19.4.2006, affecting the treatment of Goods Transport Agency services as output services.

Referring to the case of Alstom Projects India Ltd., the Tribunal highlighted that after the explanation's deletion, Goods Transport Agency services could not be considered output services by the recipient. The Tribunal also considered the circular F.No. 341/18/2004-TRU, emphasizing that penalties should not be imposed unless there is deliberate fraud or willful misstatement. The Tribunal partially allowed the appeal, recognizing the legal interpretation discrepancies and the evolving nature of the law.

In conclusion, the Tribunal's judgment clarified the interpretation of Rule 2(p) of the Cenvat Credit Rules regarding the availability of CENVAT Credit for payment of Service Tax on Goods Transport Agency services. The decision emphasized the impact of the explanation's omission and the evolving legal landscape, leading to the partial allowance of the appeal based on the absence of penalties in the absence of deliberate fraud.