2018 (12) TMI 376 - AT - Service Tax

CENVAT Credit - GTA Service - credit for the period 20/4/06 to 12/07/2006 is not eligible for the reason that Rule 2(p) was omitted - service tax on inward GTA was paid by M/s Nirma Marketing Enterprise whereas the credit was availed by the appellant - credit on inward GTA was availed prior to 01/01/2005 when there was no reverse charge for the purpose of payment of service tax. Denial of credit for the reason that explanation of Rule 2(p) was omitted - Held that - The denial of credit on the ground that explanation of Rule 2(p) was omitted is absolutely incorrect for the reason that the appellant, even thereafter discharging the Service tax on Reverse Charge Mechanism. In term of Rule 2(r) of Cenvat Credit Rules, 2004, the person who is liable to pay the Service Tax is a deemed provider of service. Therefore, by virtue of this provision, since the appellant is undisputedly discharging the Service Tax even though on Reverse Charge Mechanism, he is deemed service provider. The inward transportation on deemed service is discharged is otherwise the input service for the purpose of Cenvat Credit as per the definition of input service under 2(l) of Cenvat Credit Rules. Therefore, the lower authorities have wrongly denied the Cenvat Credit on this ground - credit allowed. Denial of credit for the reason that invoice of GTA is in the name of Nirma Marketing Enterprise - Held that - Both Nirma Marketing Enterprise and appellant are separately registered and engaged in separate activities. Therefore, in the eyes of Service Tax laws both are separate assessee. Even though both are under the same company, both are separate assessee. Credit of one assessee cannot be transferred to another. Accordingly, the credit availed by the appellant on the strength of invoice which is in the name of Nirma Marketing Enterprises is not admissible - credit rightly denied. Cenvat credit prior to 01/01/2005 was argued only on limitation - Held that - Though the appellant have declared aggregate Cenvat amount in the ST-3 return but individual service wise credit detail is not available in the ST-3 return. The discrepancy was pointed out by the audit. Thereafter only the Show Cause Notice was issued. Prior to audit the fact was not disclosed to the department. Therefore, there is a clear suppression of fact on the part of the appellant. Accordingly, the demand cannot be set aside on account of time bar - Credit for the time prior to 01/01/2005 is upheld. Appeal allowed in part.

Summary

Issues: Admissibility of Cenvat credit in respect of inward GTA service

Issue 1: Omission of Rule 2(p) and deemed output service provider status
The lower authority disallowed the credit for a specific period due to the omission of Rule 2(p) explanation. The appellant argued that they remained a deemed output service provider as they paid Service Tax on Reverse Charge Mechanism. The appellant contended that inward transport service was their input service used for providing output services. The Tribunal held that the appellant, discharging Service Tax on Reverse Charge Mechanism, was deemed a service provider. As per Rule 2(r) of Cenvat Credit Rules, the person liable to pay Service Tax is deemed a service provider. Therefore, the denial of Cenvat Credit based on the omitted explanation was deemed incorrect, and the demand was set aside.

Issue 2: Credit availed by a different entity
The credit was disallowed as the service tax on inward GTA was paid by a different entity. The appellant argued that the entity paying the tax and availing the credit were part of the same company, thus the credit should be allowed. However, the Tribunal found that both entities were separately registered and engaged in distinct activities. Despite being under the same company, they were considered separate assesses under Service Tax laws. Therefore, the credit availed based on invoices in the name of the other entity was deemed inadmissible, and the demand on this issue was maintained.

Issue 3: Cenvat credit prior to 01/01/2005 and time bar
The appellant had availed Cenvat credit before 01/01/2005 when there was no reverse charge for service tax payment. The appellant argued on limitations, stating that the details were mentioned in the ST-3 return, thus no suppression of facts occurred. However, the Tribunal noted that individual service-wise credit details were not available in the ST-3 return, leading to a discrepancy identified during an audit. The Tribunal deemed this a suppression of facts, upholding the demand for Cenvat credit prior to 01/01/2005. The adjudicating authority was directed to quantify the eligible Cenvat Credit based on this observation. Consequently, the appeal was partly allowed, addressing the issues comprehensively.