Payment of service tax on GTA from Cenvat Credit

PJ/Case Laws/2011-12/1251

CASE: CCE, GHAZIABAD Vs M/s BPL DISPLAY DEVICES LTD

CITATION: 2011-TIOL-841-CESTAT-DEL

Issue:- Whether the respondent could pay the service tax on the GTA services received as service recipient by using Cenvat credit or whether the same was required to be paid-in cash?

Brief Facts:- The respondents are manufacturers of Colour Picture Tubes chargeable to central excise duty under Chapter 85 of the Central Excise Tariff. Since they also receive Goods Transport Agency (GTA) services in respect of which they are liable to pay service tax as service recipient. They had availed Cenvat credit of central excise duty paid on inputs and capital goods and of service tax paid on "input services" used in or in relation to the manufacture of the final products.

The department was of the view that during April, 05 to September, 2005 period, they have wrongly paid the service tax of Rs.40, 949/- though Cenvat credit account and thus, they have wrongly utilised the Cenvat credit as per the provisions of Cenvat Credit Excise Rules, the Cenvat credit could be used only for payment of central excise duty on the final products or service tax on output services, while the GTA service received by them is not their "output service".

The Asstt. Commissioner vide Order-in-Original confirmed the service tax demand, on appeal to the Commissioner (Appeals), the Commissioner (Appeals) set aside the Asstt. Commissioner's order and allowed the appeal holding that in view of explanation to Rule 2 (p) of Cenvat Credit Rules, 2004 During the period of dispute, GTA services received by the respondent, on which they were liable to pay the service tax is deemed to be their output services and hence, the service tax on GTA has been rightly paid by utilising the Cenvat credit.

Against this order of the Commissioner (Appeals), the Revenue filed this appeal.

Appellant’s Contention:-Revenue pleaded that the GTA service received by the respondent is their input service and not their out put service, that the explanation to Rule 2 (p) during the period of dispute is applicable to only in respect of those persons who do not manufacture any final products or provide any service, while in this case, the respondent is a manufacture of excisable goods and hence, the Explanation to Rule 2(p) is not applicable.

In terms of the Rule 3(4) of the Cenvat Credit Rules, 2004, the Cenvat credit can be utilised for payment of excise duty on the final products or service tax on any output service/services, that since the GTA service is not the output service of the appellant, the service tax on the same cannot be paid by utilising the Cenvat credit and should have been paid in cash.

The Tribunal in the case of CCE, Rajkot Vs. Adishiv Forge P.Ltd. [2008 (9) STR 534 (Tribunal)] has held that payment of service tax by the respondent on the GTA service received by them does not make, them service provider and they continue to be service recipient

The same view has been taken by the Member (Technical) in the case of M/s. Panchmahal Steel Ltd. reported in2008 (12) STR 447 (Tribunal) and this matter has been referred to the Larger Bench for decision and that in view of this, the impugned order is not correct.

Reasoning of the Judgment:- In the present case, the GTA service received by the respondent is not the service which has actually been provided by the respondent. The respondent is only a deemed "provider of taxable service" for the reason he is the person liable to pay the service tax on the GTA service received. Moreover, the GTA services which is received by the respondent is specifically covered by the definition of "input services" and the same services cannot be considered as "input service" as well as "output service".

The Tribunal’s decision in the case of Adishiv Forge P. Ltd. and M/s. Panchmahal Steel Ltd. is considered. In view of this, it was concluded that the GTA services received by the respondent cannot be treated as their "output service"

The respondents have wrongly paid the service tax on the GTA serviced received by them through Cenvat credit.

Decision:- Revenue Appeal allowed.

Comment:- The above decision shows the consistent view maintained that service tax for GTA are to be paid only through Cash and not through Cenvat, however the service tax paid on outward freight can be taken as Cenvat credit subject to fulfillment of conditions as held in the decision of Ambuja Cement Ltd. Also, in the case of ABB Ltdit has been held that till 18.04.2006 Service Tax on GTa could be paid from Cenvat account.

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PJ/Case Laws/2011-12/1251

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