Discharge of Service Tax liability of Service Recipeint of GTA service from cenvat Credit

PJ/Case Laws/2011-12/1543

Case: COMMR. OF C. EX., CHANDIGARH v. NAHAR INDUSTRIAL ENTERPRISES LTD.

Citation: 2012 (25) S. T. R. 129 (P & H)

Issue:- Whether assessee, service recipient of GTA can discharge the service tax liability from cenvat credit account?

Brief Facts:- Respondents are engaged in the manufacturing of textile goods. They are also deemed output service providers for payment of service tax under the Goods Transport Agency services. They utilised the Cenvat credit for payment of service tax on GTA services. The Cenvat credit availed by the respondents.

Department contended that the service tax ought to have been paid in cash and not from the Cenvat credit. Show cause notice was issued to respondents.

The Adjudicating Authority confirmed the demand of service tax of Rs. 9,26,819/- with interest and also imposed penalty.

In appeal, the Commissioner (Appeals) who set aside the order of the Adjudicating Authority and held that services received by the respondents on which they were liable to pay service tax became "Output Service" for the purpose of Cenvat Credit Rules, 2004 and, therefore, service tax could be paid out of the Cenvat credit.

Aggrieved by order of Commissioner, Revenue filed appeal before the Tribunal but the Tribunal dismissed the appeal and upheld the order of Commissioner (Appeal). It was held that there is no restriction for utilization of Cenvat credit by manufacturing unit towards payment of service tax, as service tax provider at the relevant time.

Revenue has further challenged the order of Tribunal in this appeal before the High Court.

Reasoning of Judgment:- The High Court held that according to Para 2.4.2 of CBEC Excise Manual of Supplementary Instructions, there is no legal bar to the utilisation of Cenvat credit for the purpose of payment of service tax on the GTA services. Also as per Rule 3(4)(e) of Cenvat Credit Rules, 2004, the Cenvat Credit may be utilised for payment of service tax on any output service.

It was held that in case of Respondents, service tax was paid out of the Cenvat credit on GTA services and hence, respondents were well within their right to utilise the Cenvat Credit for the purpose of payment of service tax and the respondents were entitled to pay the service tax form Cenvat credit. Question of law answered in favour of assessee.

Decision:- Appeals dismissed

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PJ/Case Laws/2011-12/1543

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