2017 (11) TMI 1291 - AT - Service Tax

CENVAT credit - subsidiary of M/s Gail India Ltd. - Revenue s contention is that in as much as the appellant was not undertaking any taxable service by transportation of goods through pipelines, the availment of credit by them was not justified, whereas case of appellant is that they were paying service tax on the activity of transportation of the said gas through pipelines and as such the entire credit availed by them stands utilized - whether the appellant is entitled to avail the credit of service tax paid by M/s Gail India Ltd. or not? - Held that - Such credit stands utilized by the appellant for payment of service tax on their activity of transportation even though there was no requirement to do so. By paying service tax, the appellant has utilized the entire Cenvat Credit and as such it can be concluded that the credit paid by the assessee stands reversed. In such a scenario, confirmation of the same for the second time is neither justified nor warranted. There is no warrant for confirmation of Cenvat Credit availed and already utilized by the appellant for payment of service tax on their activity of transportation of gas through pipelines - appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Availment of Cenvat Credit of service tax paid by another entity.
2. Liability to pay service tax on transportation of goods through pipelines.
3. Justification for reversal of Cenvat Credit by the appellant.

Analysis:

Issue 1: Availment of Cenvat Credit of service tax paid by another entity
The appellant, a subsidiary of M/s Gail India Ltd., availed Cenvat Credit of service tax paid by M/s Gail India Ltd. The audit raised an objection that the appellant, only involved in purchasing and selling gas, was not entitled to this credit. A show cause notice was issued, demanding duty payment for a specific period. The original Adjudicating Authority confirmed the demand and imposed a penalty. The Commissioner(Appeals) upheld the duty confirmation but reduced the penalty to 25% if paid within 30 days. Both the appellant and the Revenue appealed against this order.

Issue 2: Liability to pay service tax on transportation of goods through pipelines
The core issue was whether the appellant was entitled to avail the credit of service tax paid by M/s Gail India Ltd. The Revenue argued that since the appellant did not undertake any taxable service through transportation of goods via pipelines, availing the credit was unjustified. On the contrary, the appellant contended that they paid service tax based on clarifications given by the Revenue to M/s Gail India Ltd., and thus, the credit was rightfully utilized.

Issue 3: Justification for reversal of Cenvat Credit by the appellant
The appellant ceased taking the credit and stopped paying service tax on transportation activity from 2013 onwards. It was argued that the transportation charges were part of the gas value, and no service tax was required. Referring to a circular, it was clarified that in cases where the owner/seller sells and transports gas to the purchaser until delivery, the sale remains a contract of sale, not a works contract. The appellant's payment of service tax led to the utilization of the entire Cenvat Credit, indicating a reversal of the credit. Citing a precedent, it was established that demanding the availed credit again when already utilized for duty payment is unwarranted. The Tribunal set aside the impugned order, allowing the appellant's appeal, rendering the Revenue's appeal for penalty enhancement moot.

This detailed analysis of the judgment highlights the key issues, arguments, and the Tribunal's decision, providing a comprehensive understanding of the legal aspects involved in the case.