Whether service tax liability under GTA can be discharged utilizing Cenvat Credit for period prior to amendment in definition of output service?

PJ/Case Laws/2012-13/1377

Case:-M/s MODIPON LTD Vs COMMISSIONER OF CENTRAL EXCISE, GHAZIABAD

Citation:-2012-TIOL-1934-CESTAT-DEL

Brief facts:-The appellants are engaged in the manufacture of filament yarn, During the period from October, 2006 to September, 2007, the appellants availed GTA services in respect of transport of inputs to their factory and for payment of service tax as recipient of GTA services, they utilized the Cenvat Credit to the extent of Rs. 6,53,601/-. The department is of the view that since the appellants have discharged service tax liability in respect of GTA services received by them as recipient; that GTA service is not their input service and therefore the service tax amount should have been paid in cash and not by utilizing Cenvat credit which can be utilized only for payment of central excise duty on finished manufactured products or payment of service tax on the output service. After issue of show cause notice, Addl. Commissioner vide Order-in-Original No.01/ADC/GZB/ST/09, dtd. 18.02.09 confirmed service tax of Rs.6,53,601/- along with interest and imposed equal penalty under section 76 of Finance Act, 1994. On appeal, the Commissioner(Appeals) while upholding the service tax demand set aside the penalty under section 76 ibid. It is against this order of the Commissioner(Appeals), this appeal has been filed challenging upholding the service tax demand.

Appellant contention:- The appellant placed relied on the decisions given in the following cases:

· Shree Rajasthan Syntex Ltd. reported as 2011 (24) STR 670 (Tri.).

· Nahar Industrial Enterprises reported as 2012 (25) STR 129 (P&H)

Respondent contention:-The respondent relies on the Tribunal's decision in the case of Iswari Spinning Mills reported as 2011 (22) STR 549 (Tri.). Holding that Cenvat credit is not available for discharge of service tax on GTA services received by an assessee during the period beyond 18.04.06. It is also contended that with the omission of the said explanation GTA services received by the assessee cannot be held to be an output service so as to utilise the Cenvat credit.

Reasoning of judgement:-It has been held by the Tribunal that the above submission of the Revenue was considered by the Division Bench of the Tribunal in the case of Shree Rajasthan Syntex Ltd. reported as 2011 (24) STR 670 (Tri.). It was held in the said decision that even with the deletion of explanation in Rule 2(p), the received GTA services would still be entitled to be considered as output service in terms of the provisions of Rule 2(r) of Cenvat Credit Rules, 2004. The period involved in the said decision of the Tribunal in the case of Shree Rajasthan Syntex Ltd. was after 19.04.06. However, apart from the fact, this is a Single Member Bench's decision, whereas the Tribunal's decision in the case of Shri Rajasthan Syntex Ltd. is by a Division Bench, it was also noted that provisions of Rule 2(r) of Cenvat Credit Rules, 2004 were not considered in the case of Iswari Spinning Mills.

The issue of availability of Cenvat credit for discharging service tax on GTA services so received during the period after 18.04.06 and before 01.03.08 stands decided by various decisions of the Tribunal. The Hon'ble Punjab & Haryana High Court's judgement in the case of Nahar Industrial Enterprises reported as 2012 (25) STR129 (P&H) = (2010-TIOL-868-HC-P&H-ST)as also Hon'ble Himachal Pradesh's judgement dtd. 29.07.11 in the case of Auro Spinning Mills, have settled the issue that Cenvat credit is available for payment of GTA services on service tax as recipient of GTA services.

In view of the above by following the Tribunal's decision in the case of Shree Rajasthan Syntex Ltd. read with Hon'ble Punjab & Haryana High Court's judgement in the case of Nahar Industrial Enterprises as also by Hon'ble Himachal Pradesh's decision in the case of Auro Spinning Mills, the impugned order is set aside and the appeal is allowed with consequential relief to the appellant.

Decision:-Appeal allowed.

Comment:-The analogy drawn from this case is that service tax liability in respect of GTA services can be very well discharged by utilizing the cenvat credit balance for the period prior to the amendment in the definition of output service (w.e.f. 01.03.2008).

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PJ/Case Laws/2012-13/1377

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