Custom, Excise & Service Tax Tribunal
Prajapati Chemicals & Allied Ltd vs Cce, Allahabd on 13 June, 2014
IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL, NEW DELHI COURT NO. III SINGLE MEMBER BENCH Appeal No. ST/332/2011 (Arising out of OIA No.104/ST/APPL/ALLD/2010 dt.26.10.2010 passed by the CCE(Appeals), Allahabad) Prajapati Chemicals & Allied Ltd. Appellants Vs. CCE, Allahabd Respondent
Appearance:
None for the Appellants Shri Ranjan Khanna, DR for the Respondent CORAM:
Hon'ble Mr. Manmohan Singh, Member (Technical) Date of Hearing/decision: 13.06.2014 FINAL ORDER No.52646/2014 Per MANMOHAN SINGH:
The issue involved in this appeal is whether credit taken on GTA services could be utilised for payment of service tax on the freight amount paid by them towards outward transportation of their final products as well as inward transportation of their inputs/capital goods at a specified time.
2. The matter was earlier heard by the Tribunal on 1.8.2012 wherein it was held that the matter relates to the period after 18.4.2006 and relying upon Honble High Court of Punjab and Haryana in the case of CCE, Chandigarh vs.Nahar Industrial Enterprises Ltd.-2012 (25) ELT STR 129 (P&H), appeal of party was allowed by the Tribunal. However, the department pointed out that the period involved in the Final Order No.1115/2012-SM (Br) dt.1.8.2012 passed in this case was prior to 18.4.2006. Accordingly ROM application was accepted and order was recalled.
3. None appeared on behalf of the appellant. Appellant have chosen not to avail the facility of hearing and requested the matter may be decided on merits.
4. The matter was examined with the assistance of ld.DR.
5. From the records, it is observed that the appellants have relied on the order of the Tribunal in the case of Nahar Industrial Enterprise [2007 (7) Service Tax Rules, 1994 26 (T)]. Period involved in that case was not the same as in the present case which was financial year 2005-06 and 2006-07. The issue whether Cenvat credit can be utilised for paying service tax on certain input services by treating them as output service was comprehensively examined in a later case by the division bench of the Honble Tribunal in the case of ITC Vs. CCE Guntur [ 2011 (23) STR 41 (T)]. The Honble Tribunal observed that with effect from 19.4.2006 when the explanation under Rule 2(p) of Cenvat Credit Rule was deleted, only the services actually provided by an assessee could be treated as output services and not the services received by him even if he was liable to pay service tax on such received services. The Honble Tribunal, further, observed in para 11 of the order that in fact the explanation deeming the taxable services received by an assessee as an output services was also applicable to persons who were neither a manufacturer nor a service provider. It was further clarified that even during the period prior to 19.4.2006 also the service tax on the taxable services received by an assessee on which he was liable to pay service tax under reverse charge mechanism, he was required to pay service tax in cash and not by utilising Cenvat Credit Account.
6. Ld.DR pointed that before 18.4.2006 as per ratio of the judgement of Honble High Court of Punjab and Haryana in the case of CCE, Chandigarh vs.Nahar Industrial Enterprises Ltd. And Honble Tribunals judgement in the case of ITC vs. CCE, Guntur-2011(23) STR 41 (T), there was no scope for utilization of credit arising out of GTA service used in the other service.
7. I have gone through the facts and above extracts for relevant judgements. DR has rightly pointed out to the latest authority in the form of Honble Tribunals judgement in the case of ITC Vs. CCE Guntur 2011 (23) STR 41 (T) where it has clearly been held that these was no scope for utilisation of credit arising out of GTA service used in the other service.
8. I have also gone through Commissioner (Appeals)s Order. He after relying upon Honble Tribunal judgement in Modipon Ltd. Vs. Commissioner of Central Excise, Ghaziabad 2010 (19) STR 217 (Tri.-Del), agreed with adjudicating authoritys finding that by passing the service tax on uniward transportation from the Cenvat credit account, they have over ridden the provision of the rule causing such utilisation of Credit to be irregular and inadmissible. Relevant portion of Honble Tribunals judgement in Modipon Limited is reproduced which is self explanatory The appellant are manufacturers and for manufacture of finished goods, certain raw material were being received for which GTA service was availed. As per provisions of law, the appellant were required to pay service tax on the GTA service received by them as service recipient. The appellants, however, discharged service tax liability in respect of GTA service received by them by utilizing Cenvat credit while according to the department Cenvat credit could be utilised only for payment of duty on finished products or service tax on the output service and that since GTA service received by them is not their output service, the service tax liability on the GTA service could not be discharged through Cenvat credit.
7. During the period of dispute Rule 2(p) relating to definition of output service was:
Output service means any taxable service provided by the provider of service to a customer, client subscriber, policy holder or any other person, as the case may be and the expressions provider and provided shall be construed accordingly.
8.From plain reading of this provision, it is clear that service received by an assessee cannot be treated as output service and in respect of such service received by him, he cannot be treated as provider of service. I find that the same view has been taken by the Board in its Circular No. 97/8/2007, dated 23.8.2007, wherein the Board has clarified that in terms of Cenvat Credit Rules, output service means any taxable service provided by the provider of taxable service to be service receiver; that definition of provider of taxable service includes a person liable to pay service tax; that reading the two definitions in conjunction, it is clear that, to form output service, taxable service has to be actually provided by the provider of taxable service and that even if due to a legal fiction, a consignor or a consignee qualifies to fall under the definition of a person liable to pay service tax (and consequently a provider of taxable service), it cannot be said that he has actually provided any taxable service. Just because in respect of the service provided by a Goods Transport Agent (GTA) the consignee has been made liable to pay service tax, that service received by the consignee does not become their output service. Therefore,, the service tax payable by the consignor or consignee on transportation of goods by road cannot be paid through Cenvat credit by such consignor or consignee. The above clarification by the Board has to be treated as contemporaneous exposition of Rule 2(p). Moreover this clarification is in accordance with settled law that legal fiction can be applied only for the specific purpose for which it has been made not for other purpose. In view of above, I find no force in appellants appeal and reject the appeal.
(dictated & Pronounced in the open court)
(Manmohan Singh) Member(Technical)
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