2013 (8) TMI 215 - HC - Service Tax

Goods Transport Agency - Service Tax on GTA under reverse charge - payment of service tax through cenvat credit - assessee was engaged in manufacture of yarn of different kinds – Whether the Tribunal was correct in disregarding the Board Circular while deciding the appeal when it had been held by Apex Court and other High Courts that the interpretation of the CBEC will be binding upon the Revenue – Held that:- Department was of the view that the adjustment of the CENVAT Credit side towards the liability on Service tax was contrary to the Rule – Duty demand u/s 73 – Interest u/s 75 – penalty u/s 76 - the Rules contemplated adjustment of service tax liability as against the CENVAT Credit available to the assessee the circular relied on would not be of any assistance to the Revenue - the view of the Punjab and Haryana High Court, the Delhi High Court and the Himachal Pradesh High Court endorsed.

Whether the Tribunal was right in holding that the respondents did not provide any taxable service though they did manufacture an excisable product – the GTA service so received by the respondents would have been covered under the definition of "input service" under Rule 2(1) of Cenvat Credit Rules. By virtue of the explanation, it shall be deemed to be "output service" even after deletion of the explanation given at Rule 2(p) read with definition given at Rule 2(q) and (r) convey similar meaning" - Held that:- There was no error in the reasoning of the Tribunal that in the payment of service tax liability by the recipient of taxable service - assesses were also entitled to make use of CENVAT Credit to discharge their liability under the Service Tax provisions – A reading of Rules 2(l) and 2(b) would show that they cover two different situations and though their operations were totally different - for the purpose of giving credit to the service tax payable from the CENVAT Credit available - the recipient was also entitled to the same relief as a provider of the service – while Rule 2(l) and 2(p) cover two classes of persons, the recipient of GTA services, by virtue of the Explanation to Rule 2(p) of the CENVAT Credit Rules, as a provider of output service, was entitled to all benefits that a person providing input service would be entitled to in the matter of CENVAT credit adjustment.