Whether CENVAT credit be allowed if service tax is paid by GTA instead of the recipient of the service?

PJ/Case Law /2016-17/3336

Case:-GENERAL MANAGER, J.K. SUGAR LTD. VersusCOMMISSIONER OF C. EX., MEERUT-II
Citation:-2016 (43) S.T.R. 292 (Tri.-All.)
Brief facts:-The appellant is in appeal against order-in-appeal dated 29-4-2009 passed by the Commissioner (Appeals), Customs and Central Excise, Meerut-II whereby it have been held that the appellant being a manufacturer and a company was liable to pay service tax as recipient of service and accordingly is not entitled to take Cenvat credit of the service tax paid by the provider of service - GTA.
The brief facts are that show cause notice dated 8-2-2008 was issued as it appeared to Revenue that the appellant should have paid the service tax for the inputs received in the factory and as the appellant had not deposited the service tax and the same have been paid by the GTA there has been violation of Rule 2(1)(d)(v) of Service Tax Rules read with provisions of Notification No. 36/2004-S.T. It further appeared that Rule 9(1)(e) of Cenvat Credit Rules, 2004 provides that Cenvat credit shall be taken by the manufacturer on the basis of a Challan evidencing payment of service tax by the person liable to pay service tax under sub-clauses (iii), (v) and (vii) of clause (d) of sub-rule (1) of Rule 2 of Service Tax Rules. Accordingly the appellant was required to show cause as to why service tax amount of Rs. 64,658 should not be recovered as per provisions of Section 73 of the Finance Act along with interest and further penalty was also proposed under Sections 76, 77 and 78. It further proposed to disallow the Cenvat credit taken of equal amount along with interest and further penalty was proposed. The SCN was adjudicated on contest and the demand proposed was confirmed. Further penalty was imposed under Section 78 of Rs. 1,29,316/-. Cenvat credit of Rs. 64,658/- were also disallowed and further penalty of Rs. 64,658/- was imposed under Rule 15 of CCR read with Section 11AC of the Act. Being aggrieved the appellant had preferred appeal before the learned Commissioner (Appeals), who was pleased to reject the appeal observing that tax paid by the GTA is not the proper payment as required under Rule 2(1)(d)(v) of Service Tax Rules and accordingly as GTA is not the p erson liable, whatsoever tax is deposited by him, the appellant cannot take credit.
Appellant’s contention:-Being aggrieved the appellant is in appeal before this Tribunal. The learned Counsel for the appellant states that the issue is no longer res integra. In the precedent ruling of this Tribunal in Navyug Alloys (P) Ltd. v. CCE - 2008 (8) TMI 100 - CESTAT, Ahmedabad, under similar circumstances where service tax on the service was paid by the transporter - GTA and the Revenue again demanded tax from manufacturer on contention that it was the liability of the manufacturer to pay the tax, was held not acceptable. It was further held that once tax is already paid on the services it was not open to the department to confirm the same against the manufacturer appellant in respect of the same service. The said ruling was followed by this Tribunal in 2014 (2) TMI 100 - CESTAT, Mumbai, in the case of Umasons Auto Compo Private Ltd. v. Commissioner of Central Excise & Customs, where the recipient of GTA service had paid the service tax to the provider of service and the provider had paid to the Revenue, and the appellant had availed the Cenvat credit, it was held that there is no dispute regarding payment of service tax by the provider of GTA service. Once the amount of service tax is accepted by the Revenue from the provider of service, it cannot be again demanded from the recipient of the service. The learned Counsel further stated that under the scheme of the Act, it is prima facie liability of the provider of service to pay the service tax. Further the service tax was charged in invoices by the GTA and the GTA is registered with Service Tax Department and there is no dispute regarding the payment of service tax to the GTA by the appellant and deposit of such tax by the GTA, service tax cannot be demanded again from them and they are rightly entitled to take Cenvat credit

Respondent’s contention:-The learnedly AR for Revenue relies on the impugned order. He further emphasises that under Rule 9 of the Cenvat Credit Rules the person availing Cenvat credit should be in possession of Challan, showing deposit of tax along with the copy of the bills.
Reasoning of judgement:-Having considered the rival contentions, the Tribunal found that under the scheme of the Act, under Section 68(1), it is provided that every person providing taxable service to any person shall pay service tax at the rate specified in Section 66, in such manner and within such period as may be prescribed. Further in sub-section (2) of Section 68 it is provided that notwithstanding anything contained in sub-section (1), in respect of such taxable services as may be notified (with effect from 1-7-2012) by the Central Govt., in the official Gazette, the service tax thereon shall be paid by such person and in such manner as may be prescribed at the rate specified and all the provisions of this chapter shall apply to such person as if he is the person liable for paying the service tax in relation to such service. The Tribunal found that the words “in respect of such taxable service as may be notified”, have been inserted in sub-section (2) with effect from 1-7-2012 by the Finance Act, 2012. Thus it was held that prior to 1-7-2012, under the provisions of Section 68(1), the tax already has been deposited by the GTA in the facts of the present case. The Tribunal further held that Rule 2(1)(d)(v) of Service Tax Rules does not override the provisions of the Act. Moreover it found that it has been clarified by C.B.E. & C. in Circular No. 97/8-2007-S.T., dated 23-8-2007 - clarifying that service tax may be paid either by the consignee or by the consignor or by the GTA, where the consignee is a manufacturer and the service in question is input service for them, in such case manufacturer would be eligible to take the Cenvat credit of the same. Accordingly the Tribunal held that the appellant have taken Cenvat credit in accordance with law. The Tribunal further found that invoice is a prescribed document under Rule 9(1)(f) of Cenvat Credit Rules, 2004 on which credit can be taken. Accordingly the impugned order was set aside and the appeal was allowed. The appellant will be entitled to consequential benefit, if any, in accordance with law.
Decision:-Appeal allowed.
Comment:-The gist of the case is that the assessee received the GTA service and thus was liable to pay service tax and the same was paid by the transporter. Since the service tax was already paid by transporters, therefore, the same amount cannot be demanded for the same service .Further, as Sec 68(1) of Finance Act, 1994 existed prior to 1-7-2012,it had no stipulation with regard to person liable to pay. Further C.B.E. & C. Circular No. 97/8/2007-S.T., dt 23-8-2007 clarified that tax under aforesaid services can be paid either by consignee or consignor or transporter. Hence, demand is not sustainable as per Sec 73 of Finance Act, 1994. Further, as the Service Tax was paid by transporter on aforesaid service against proper invoice, which is a prescribed document, Cenvat credit was not deniable.
Prepared by:-Praniti Lalwani

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PJ/Case Law /2016-17/3336

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