2012 (10) TMI 795 - AT - Service Tax

Service Tax paid on GTA services - Following the decision of court in case of INDIA CEMENTS LTD. Versus COMMISSIONER OF C. EX., SALEM, 2007 (3) TMI 83 - CESTAT, CHENNAI Held that - In the presence of specific provision providing for treatment of service for which the Assessee is liable to pay Service Tax on out-put services - appellant is eligible for Cenvat credit. Out-ward transportation - whether the appellant is eligible for the credit of Service Tax paid on out-ward transportation of finished goods from the place of removal during the period from April, 2005 to September, 2005 - Held that - Credit of Service Tax would be available in respect of Service Tax paid on out-ward transportation of finished goods from the place of removal. Accordingly the entire demand for service tax and penalties imposed cannot be sustained. Therefore, the appeal filed by the Revenue is rejected and cross objection also gets disposed of.

Summary

Issues:
1. Whether Service Tax on GTA services could have been paid from cenvat credit availed for the Service Tax paid on GTA services during April 2005 to September 2005.
2. Whether the appellant is eligible for the credit of Service Tax paid on outward transportation of finished goods from the place of removal during April 2005 to September 2005.

Analysis:
1. The first issue pertains to the eligibility of paying Service Tax on GTA services from cenvat credit during April 2005 to September 2005. The relevant Rule-2 (P) of Cenvat Credit Rules, 2004, was crucial in determining this. It was noted that the explanation clarifying the treatment of service for which the service receiver is liable to pay Service Tax as output service was removed on 19/4/2006. This removal implied that post this date, the service for which the service receiver is liable to pay Service Tax could not be considered as output service. The decision of the Tribunal in a specific case was cited to support this interpretation. As the period in question was prior to 19/4/2006, the appellant was deemed eligible for Cenvat credit for the Service Tax paid on GTA services.

2. The second issue revolved around the appellant's entitlement to the credit of Service Tax paid on outward transportation of finished goods from the place of removal during April 2005 to September 2005. Both parties agreed that the issue was settled in favor of the assessee based on a decision by the Hon'ble High Court of Karnataka in a specific case. The High Court's ruling highlighted that prior to 1/3/2008, the credit of Service Tax was available for outward transportation of finished goods from the place of removal. This ruling was based on a notification that amended the relevant rule. Consequently, the demand for service tax and penalties imposed were deemed unsustainable, leading to the rejection of the Revenue's appeal and the disposal of the cross objection.

In conclusion, the judgment addressed the two key issues concerning the payment of Service Tax on GTA services from cenvat credit and the eligibility for credit on outward transportation of finished goods. The legal interpretations and precedents cited played a crucial role in determining the outcomes for the appellant in both aspects, ultimately resulting in the rejection of the Revenue's appeal and the disposal of the cross objection.