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2015 (9) TMI 1217 - MADRAS HIGH COURT

2015 (9) TMI 1217 - MADRAS HIGH COURT - TMI - Denial of CENVAT Credit - Goods Transport Agency services - contravention of Rule 3 (4) of the Cenvat Credit Rules - Held that:- The decision relied on by the Tribunal in R.R.D. Tex case (2007 (5) TMI 84 - CESTAT, CHENNAI), was also upheld by this Court in Commissioner - Vs - R.R.D. Tex Pvt. Ltd. (2013 (7) TMI 920 - MADRAS HIGH COURT). - A cursory reading of the above orders clearly reveal that the decision is squarely applicable to the facts of the .....

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resent appeals. This Court, vide order dated 2.7.10, while admitting the appeals, framed the following substantial questions of law for consideration :- "i) Whether the Tribunal was correct in holding that the respondents were entitled to utilise the Cenvat Credit for payment of service tax on Goods Transport Agency services received by them in view of the CBEC Circuler 345/4/2005- TRN dated 3.10.2005, particularly as the circular has not been challenged or set aside? ii) Whether the Goods .....

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g credit of duty paid on inputs and capital goods and service tax paid on input services. During the period from March, 2005 to January, 2006, the assessee paid service tax of ₹ 2,52,476/- on Goods Transport Agency services received by them. The amount so paid was taken as credit as GTA service qualified as an input service. However, the Department was of the view that payment of service tax by utilising the Cenvat Credit was in contravention of Rule 3 (4) of the Cenvat Credit Rules, 2004, .....

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er of Central Excise, Division-II, Pondicherry, confirming the demand under Rule 14 of the Cenvat Credit Rules, 2004 and further imposed interest under Section 11AB of the Act and penalty of ₹ 15,000/- under Rule 15 of the Cenvat Credit Rules. 3. Aggrieved by the said order, the assessee preferred appeal before the Commissioner (Appeals), who vide order dated 29.8.07, upheld the order of the adjudicating authority. Against the said order, the assessee moved the Tribunal by filing an appeal .....

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m April, 2005 to September, 2005, the assessee paid service tax of ₹ 8,14,327/- on Goods Transport Agency services received by them. The amount so paid was taken as credit as the GTA service qualified as an input service. However, the Department was of the view that payment of service tax by utilising the Cenvat Credit was in contravention of Rule 3 (4) of the Cenvat Credit Rules, 2004, as the GTA service was not an output service. Therefore, a show cause notice dated 10.10.2006 was issued .....

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the order vide order dated 12.11.2009. The Department moved the Tribunal by filing an appeal. The Tribunal, after considering the matter dismissed the appeal filed by the assessee following its earlier decisions in the case of India Cements Ltd. (2007 (7) STR 569) and RRD Tex Pvt. Ltd. (2007 (8) STR 186). 6. Aggrieved over the same, the Department is before this Court by filing the present appeals. 7. Heard the learned standing counsel appearing for the appellant/Department and the learned coun .....

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. 9. In the case of Cheran Spinners (supra), this Court had occasion to deal with identical questions of law and answered the questions in favour of the assessee and against the Revenue. For better clarity, the portion of the order is quoted hereinbelow :- "The above Civil Miscellaneous Appeal is filed at the instance of the Revenue against Final Order Nos. 746 to 772 of 2007, dated 22-6-2007 passed by the Customs, Excise and Service Tax Appellate Tribunal, Chennai. The above Civil Miscella .....

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ture an excisable product? But for the above explanation, the GTA service so received by the respondents would have been covered under the definition of "input service" under Rule 2(l) 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". 2. The assessee herein is engaged in manufacture of yarn of dif .....

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the Rule. It was held that the Cenvat credit could be utilised only in respect of "input service" as per definition of 2(l) of Cenvat Credit Rules, 2004. Thus, utilisation of Cenvat credit for payment of Service Tax due was improper and consequently show cause notice was issued, proposing to demand Service Tax on GTA under Section 73 of Chapter V of Finance Act, 1994 along with interest under Section 75 of the Finance Act, apart from proposing levy of penalty under Section 76 of the Ac .....

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uot;input service", in contrast to this, the explanation given under "output service" in Rule 2(l) of Cenvat Credit Rules, thus deems that in the case of a person not proving taxable service or manufacture final products but liable for paying Service Tax, the service for which he is liable to pay Service Tax by reason Section 62(2) of the Finance Act, 1994 shall be deemed as "output service". Thus, while Rule 2(l) and 2(p) cover two classes of persons, the recipient of G .....

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