2017 (1) TMI 1364 - AT - Service Tax

CENVAT credit - GTA services - Packing of the paper products using LDPE shrink film - denial on account of lack of nexus between input service and output service - Held that - The service so availed was to carry LDPE shrink films to the premises of the aforesaid clients. That being integrally connected with the output service provided, there is no question of denial of input credit of the services so availed - credit allowed. Appeal allowed - decided in favor of assessee.

Summary

Issues Involved: Claim of CENVAT credit for input services related to providing output services, specifically in the context of goods transport agency service availed by the appellant.

Analysis:

Issue 1: Claim of CENVAT Credit for Input Services
The dispute in this case revolves around the appellant's claim for CENVAT credit in relation to various input services utilized to provide output services, particularly in the context of services provided at the premises of the client. The appellant had used input services such as telephone service, courier service, security agency service, auditor’s fee, consultancy engineer fee, and housekeeping service to facilitate the provision of packing services using LDPE shrink film at the clients' premises. The appellant had discharged the service tax liability on the consideration received for packing the paper products of the clients using the LDPE shrink film. The crux of the matter was the eligibility of the appellant to claim CENVAT credit for the service tax paid on the input services used in providing the output service.

Issue 2: Goods Transport Agency Service Availed
The primary contention between the appellant and the revenue authorities was regarding the goods transport agency (GTA) service availed by the appellant to transport the LDPE shrink films to the clients' premises. The appellant argued that since the GTA service was integrally connected with the output service provided, it should not be denied input credit for this service. The authorities below had alleged that the outward transport service was not used to provide the output service, but the appellant clarified that the transport was related to moving the input to the client's premises for providing the packing service. The appellant successfully established the inextricable link between the GTA services availed and the output service of packing, leading to the conclusion that the appellant was entitled to claim CENVAT credit for the service tax paid on the GTA service.

Judgment Outcome
After hearing both sides and examining the records, the Tribunal found that the authorities below had not correctly understood the dispute raised by the appellant's counsel. The adjudicating authority and the Commissioner (Appeals) were noted to have failed to grasp the essence of the controversy outlined in the show cause notice. Consequently, the Tribunal ruled in favor of the appellant, allowing the appeal and confirming the appellant's entitlement to the CENVAT credit claimed for the service tax paid on the GTA service availed. The Tribunal also emphasized the need for clear drafting of adjudication and appellate orders, suggesting sending a copy of the judgment to the Chief Commissioner of Service Tax for guidance on improving the quality of orders issued by the department.

In conclusion, the judgment highlighted the importance of understanding the nexus between input and output services in claiming CENVAT credit and underscored the significance of clarity and precision in adjudication and appellate orders within the realm of indirect taxation.