Payment of service tax on GTA from Cenvat Credit

PJ/Case Laws/2011-12/1284

Case: M/s HERO HONDA MOTORS LTD Vs CST, DELHI

Citation: 2011-TIOL-948-CESTAT-DEL

Issue:- Whether appellant can avail Cenvat credit for discharge of service tax liability on GTA services received by him for which he is liable to discharge the same as service recipient under Section 68 of the Finance Act, 1994?

Brief Facts:- Appellant paid service tax on GTA service from cenvat credit account. Revenue contended that appellant could not utilize Cenvat credit for discharge of service tax on GTA services. Show cause notice was issued for recovery of amount paid during the period 1st January 2005 to 30th September 2005. The Adjudicating Authority dropped the proceedings following the precedent case laws.

Revenue initiated review proceedings. The Revisional authority came to the conclusion that appellant could not have utilized the Cenvat credit for the discharge of service tax liability on the GTA services, and they are to be considered as deemed output service provider and not actual service provider. The demand was confirmed and consequential penalties were imposed. Hence, appellant is in appeal before the Tribunal.

Appellant’s Contention:- Appellant submitted that the issue is now settled by the Tribunals judgment in the case of Commissioner vs. Nahar Industrial Enterprises Ltd. 2007 (7) S.T.R. 26 (Tribunal). It is submitted that an identical issue arise before the bench and bench held in favour of the assessee. The respondent submits that revenue filed Central Excise Appeal before Punjab & Haryana High Court against the Tribunals judgment. The High Courts upheld the order of the Tribunal. It is submitted that this order of the High Court has not been stayed by the Supreme Court, though revenue is in appeal.

Reasoning of the Judgment:- The Tribunal found that the issue is no more res-integra. The Punjab & Haryana High Court in Central Excise Appeal No. 99 of 2008 has decided the very same issue in favour of assessee. It was held there in that a perusal of para 2.4.2 of CBECs Excise manual of Supplementary Instructions shows that there is no legal bar to the utilization of Cenvat credit for the purpose of payment of service tax on the GTA services. It was further held therein that even as per Rule 3 (40 (e) of the CCR, 2004, the Cenvat credit may be utilised for payment of service tax from cenvat credit.

It was held that from the ratio of the judgment of the High Court it is clear that the issue stands settled in favour of assessee.

Decision:- Appeal allowed.

Comments:- The issue of paying service tax on GTA through CENVAT has been issue of litigation, and there are different judgements of tribunal either awarding in favour of assessee or against depending upon the facts & circumstances of the case. However, as of now issue is settled and definition of output service is also amended.Thus now the service tax on GTA has to be paid only through cash. Even this amendment leads to analogy that it was falling under “output service”.

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PJ/Case Laws/2011-12/1284

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