2007 (12) TMI 31 - AT - Service Tax

Held that appellants are entitled to utilize the credit in respect of input service towards payment of service tax on GTA services, which is an output service by definition reversal of credit not required

Summary

Issues:
1. Service tax demand on CENVAT credit utilization for "Goods Transport Agency's Service" for the period April-September 2005.
2. Interpretation of the definition of "Output service" under Rule 2(p) of the CENVAT Credit Rules, 2004.
3. Applicability of the Explanation to the definition of "Output service" during the dispute period.
4. Validity of availing credit for payment of Service Tax on "Goods Transport Agency's Service."
5. Comparison with similar judgments allowing credit for similar situations.
6. Consideration of circular dated 3-10-2005 of the Board regarding Service Tax liability.

Analysis:
1. The Appellate Tribunal, after examining the records and considering the demand for service tax of Rs. 94,801/- on CENVAT credit utilization for "Goods Transport Agency's Service," noted a similar allowance of credit to other assessees in a previous case. The appeal was taken up after dispensing with pre-deposit.
2. The Tribunal referred to a previous Final Order and analyzed the definition of "Output service" under Rule 2(p) of the CENVAT Credit Rules, 2004. The Explanation to the definition clarified that if a person liable for paying service tax does not provide any taxable service, the service for which the tax is due shall be deemed as the output service.
3. During the dispute period, the Explanation to the definition of "Output service" was in force. The appellants were only receiving taxable services and not providing any, making the "Goods Transport Agency's Service" received by them deemed as their "output service" for Service Tax purposes.
4. The Tribunal held that the appellants were entitled to avail credit for payment of Service Tax on the "Goods Transport Agency's Service" as it constituted their "output service." The decision of the lower authorities disallowing the credit was deemed unsustainable based on the Explanation.
5. Citing similar judgments, the Tribunal emphasized that payment of Service Tax on services like "Goods Transport Agency's Service" constituted an "output service," allowing for the valid availing of credit for tax paid on input services or goods.
6. The Tribunal considered a circular dated 3-10-2005 of the Board, which clarified certain aspects of Service Tax liability. However, the Tribunal found that the circular did not consider the Explanation to the definition of "Output service" and could not hold good during the currency of the Explanation. As a result, the impugned order disallowing the credit was set aside, and the appeal was allowed.