2018 (7) TMI 1528 - AT - Service Tax

Utilization of CENVAT credit for discharge of service tax from GTA services - period April 2007 to March 2008 - whether the appellant herein can utilise the CENVAT credit for discharge the service tax liability under reverse charge mechanism for GTA services received or otherwise? Held that - The issue is for the period April, 2007 to January, 2008 and covered by the Larger Bench decision of Tribunal in the case of Panchmahal Steel Ltd. 2014 (4) TMI 490 - CESTAT AHMEDABAD , where it was held that an assessee can utilise the CENVAT credit for discharge of service tax liability on GTA services till 31st March 2008. Appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Utilization of CENVAT credit for service tax liability under GTA services.
2. Interpretation of reverse charge mechanism for service tax liability.
3. Applicability of Tribunal and High Court decisions on CENVAT credit utilization.

Analysis:
1. The case involves a challenge against Order-in-Original No. 01/2009-S. Tax (Commnr.) dated 29.01.2009, where the appellant was alleged to have utilized CENVAT credit for service tax liability under GTA services. The Adjudicating Authority confirmed the demands raised, along with interest and penalties. The appellant argued that the demand should only be for the period April, 2008 to January, 2008, as they did not utilize CENVAT credit for February and March 2008.

2. The key issue was whether the appellant could utilize CENVAT credit for discharging service tax liability under reverse charge mechanism for GTA services. The Tribunal referred to the case of Panchmahal Steel Ltd., where it was held that CENVAT credit could be used for service tax liability on GTA services until 31st March 2008. This decision was upheld by the High Court of Gujarat and the High Court of Allahabad in separate cases.

3. The Commissioner (AR) argued that under the reverse charge mechanism, CENVAT credit could only be used to pay Central Excise duty on final products or service tax on output service, not for GTA services. However, the Tribunal found that the appellant could indeed use CENVAT credit for the service tax liability under reverse charge mechanism, based on the precedent set by the Larger Bench decision in the case of Panchmahal Steel Ltd., which was supported by the High Court of Gujarat.

4. The Tribunal also noted that the Division Bench had previously ruled that service tax liability under reverse charge mechanism for GTA services must be discharged in cash. However, this decision was overruled by the High Court of Allahabad in the case of Oudh Sugar Mills, which reinforced the applicability of the High Court of Gujarat's decision in Panchmahal Steel Ltd. The Tribunal ultimately set aside the impugned order and allowed the appeal in favor of the appellant.

In conclusion, the Tribunal held that the appellant could utilize CENVAT credit for discharging service tax liability under the reverse charge mechanism for GTA services, in line with the decisions of the Larger Bench and the High Court of Gujarat.