2007 (9) TMI 220 - AT - Service Tax

Appellants are manufacturers of Polyester Yarn - Goods Transport Agency s Service availed - credit of duty paid on inputs and capital goods as also credit of service tax paid on input services was utilized - department objected to such utilization of credit as per explanation to the definition of Output Service u/r 2(p) CCR, GTA Service on which the assessee paid the service tax should be deemed to be their Output Service credit utilization was justified assessee s appeal allowed

Summary

Issues: CENVAT credit denial for service tax paid on Goods Transport Agency's Service (GTA Service) availed by manufacturers of Polyester Yarn.

Analysis:
1. The appeal involved the denial of CENVAT credit to manufacturers of Polyester Yarn for service tax paid on GTA Service availed by them. The appellants had paid service tax amounting to Rs. 50,768 between October 2005 to March 2006 by utilizing credit of duty paid on inputs and capital goods, as well as credit of service tax paid on input services. The department objected to this credit utilization, leading to a demand of Rs. 50,678 from the party under section 73 of the Finance Act, 1994.

2. The key issue revolved around the interpretation of the Explanation to the definition of 'Output Service' under rule 2(p) of the CENVAT Credit Rules, 2004. The appellants argued that a similar matter had been considered by the Bench in previous cases, where it was held that if a person liable for paying service tax does not provide any taxable service, the service for which the tax is due should be deemed as 'Output Service'. In line with this interpretation, the GTA Service, on which the appellants paid service tax, was deemed to be their 'Output Service, allowing them to avail the CENVAT credit validly.

3. The Judicial Member referred to past decisions, such as the case of R.R.D. Tex (P.) Ltd v. CCE and M.M.S. Steels Ltd. v. CCE, where a similar view was taken, allowing CENVAT credit in comparable circumstances. Notably, the period of dispute in the present case fell before the date on which the relevant Explanation was omitted, making the cited decisions applicable. The Judicial Member considered the submissions of the learned Senior Departmental Representative (SDR) but noted the absence of any claim regarding the department obtaining a stay on the cited decisions.

4. Consequently, following the precedent set by the earlier decisions, the impugned order denying the CENVAT credit was set aside, and the appeal of the manufacturers of Polyester Yarn was allowed. The judgment emphasized the applicability of past decisions in determining the eligibility of CENVAT credit for service tax paid on GTA Service, providing clarity on the interpretation of relevant legal provisions in the context of the case.