2007 (11) TMI 92 - AT - Service Tax

Appellant not provide any service & paid service tax on GTA service received so, the GTA services in question have to be treated as output service in view of the explanation in Rule 2(p) of CCR - Held that credit was correctly utilized for discharging tax due on GTA service availed by it

Summary

Issues:
Utilization of Cenvat credit for GTA service tax payment; Interpretation of Rule 3(4)(e) of Cenvat Credit Rules, 2004; Definition of 'output service' under Rule 2(p) of CCR, 2004; Application of Explanation regarding deemed service provider; Applicability of Tribunal decisions on similar cases.

Analysis:

1. Utilization of Cenvat credit for GTA service tax payment: The case involved M/s. Pallipalaylam Spinners (P) Ltd. utilizing Cenvat credit to pay service tax on Goods Transport Agency (GTA) service for outward transportation of finished goods. The Commissioner imposed a penalty under Section 76 of the Finance Act, 1994, citing Rule 3(4)(e) of Cenvat Credit Rules, 2004, which allowed credit only for 'output service' tax payment, not 'input service' like GTA. The appellant argued that GTA service should be considered output service based on the Explanation provided.

2. Interpretation of Rule 3(4)(e) of Cenvat Credit Rules, 2004: Rule 3(4)(e) restricts Cenvat credit utilization to payment of service tax on 'output service' only. The Commissioner's decision was based on this rule, stating that GTA service does not fall under 'output service.' However, the appellant contended that the Explanation clarified that if a person liable for service tax does not provide any taxable service, the service for which tax is paid is deemed to be output service, supporting their claim.

3. Definition of 'output service' under Rule 2(p) of CCR, 2004: Rule 2(p) defines 'output service' as any taxable service provided to a customer. The Explanation further clarifies the treatment of services for tax purposes. In this case, the appellant's argument was that since they did not provide any service and paid tax on GTA service, it should be deemed as output service, aligning with the judicial authorities' rulings.

4. Application of Explanation regarding deemed service provider: The Explanation provided in the Cenvat Credit Rules aimed to remove doubts regarding the treatment of services for tax purposes. It clarified that if a person liable for service tax does not provide any taxable service, the service for which tax is paid is deemed to be output service. This Explanation played a crucial role in determining the tax treatment of GTA service in this case.

5. Applicability of Tribunal decisions on similar cases: The appellant relied on previous Tribunal decisions to support their argument that GTA service should be considered output service for tax purposes. The Tribunal considered these precedents and the arguments presented, ultimately allowing the appeal and dismissing the stay application based on the interpretation of the rules and the Explanation provided.

This detailed analysis of the judgment highlights the key issues involved, the legal interpretations made, and the application of relevant rules and explanations in determining the tax treatment of GTA service in this case.