Whether service tax payment for GTA service valid from cenvat credit?

PJ/CASE LAW/2014-15/2299

Case:-UNION OF INDIA VS. FLOWSERVE MICROFINISH VALVES PVT. LTD.

Citation:-2014(33) S.T.R. 634 (Kar.)

Brief facts:-The respondent assessee in under Service Tax as well as manufacture of excise goods and since it was found that the credit accumulated for the payment of Service Tax of goods etc. on the ground that the goods transport service cannot be treated as Service Tax as they are providing service to other users and credit had been wrongly availed, the Adjudicating Authority held that the assessee was not entitled to avail Cenvat Credit and accordingly passed the original order on 27-6-2006 to the extent of Rs. 5910 & Rs. 3920. And education cess amount of Rs. 119 & Rs. 2523 utilized towards payment of Service Tax on GRA services by the assessee for the period from Jan., 2005 to sept. 2005, respectively is irregular and confirmed the demand of Service Tax amount of Rs. 5910 & Rs. 3920. And education cess amount of Rs. 119 & Rs. 2523 respectively under sub section (2) of section 73 of the Act and further confirmed the demand of interest at the appropriate rate under section 75 of the act on the above said amount. Being aggrieved by the above orders, the instant appeals were preferred before the Appellate Authority. The Appellate Authority passed a common order holding that the availing of credit on Service Tax on goods transported service paid by the recipient of such service is not available unless the person concerned is also providing some other output services or is manufacturing dutiable goods on which Cenvat Credit taken on input service as well as input goods is available for utilization and there is no one to one correlation between credit availed and utilized and in view of the Circular dated 3-10-2005 issued by the Department C.B.E. & C., does not bar the appellant from availing the credit on good transport input services or on manufactured goods and accordingly allowed the appeals.

Appellant’s contention:-Being aggrieved by the said order, these appeals are preferred by the Revenue contending that the assessee was not entitled to make use of Cenvat credit as rightly held by the Original Authority and the Appellate Authority was not justified in reversing the order passed by the Original Authority. Therefore the order of the Tribunal may be set aside and the order of the Original Authority may be restored.

Respondent’s contention:- The learned counsel appearing for the respondents argued in support of the order passed by the Appellate Authority and the Tribunal.

Reasoning of judgement:-We have given careful consideration to the contentions of the learned counsel appearing for the parties and scrutinized the materials on record.

The fact that the respondent has been assessed both under the Excise Act and the Service Tax is not in dispute. It is also not in dispute that in view of the Circular issued by C.B.E. &C, dated 3-10-2005 referred to in order of the Appellate Authority, when the person discharging Service Tax liability is not the provider of output services, such recipient of taxable service even if they discharge their service tax liability under section 68(2) are not entitled to avail credit of the Service Tax paid on taxable services. However, there is no prohibition for utilizing the credit for the payment of Service Tax. Therefore the concurrent finding arrived at by the appellate authority and the Tribunal and in view of the principles laid down by the Hon’ble Supreme Court in the case of CCE, Chandigarh vs. M/s Nahar Industries Enterprises Ltd. [2007- TIOL-555-CESTAT-MAD = 2007(7) S.T.R. 569 (Tri.- Chennai)] andThe India Cements Ltd. Vs. CCE, Salem [2007-TIOL-645-CESTAT-MAD = 2007(7) S.T.R. 569 (Tri.-Chennai) wherein similar issue as involved in this case has been answered in favour of the assessee and against the Revenue.

In view of the above, we hold that the order passed by the appellate authority and the Tribunal is justified and in the facts of the case do not give rise to any question of law to be decided in these appeals.

Decision:-Appeals dismissed.

Comment:-The substance of the case is that the credit utilisation for payment of service tax for GTA service has been confirmed by the High Court in the case of Nahar Industries Enterprises and The India Cements Ltd. In view of the said decisions, it was concluded that the issue is settled and the appeal filed by the revenue department was dismissed.

Prepared by: - Lovina Surana

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PJ/CASE LAW/2014-15/2299

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