Customs, Excise and Gold Tribunal - Tamil Nadu
Mms Steels Ltd. vs Cce, Trichy on 22 June, 2007
ORDER P.G. Chacko, Member (J)
1. After examining the records and hearing both sides, I am of the view that the appeals require to be finally disposed of at this stage. Accordingly after dispensing with predeposit, I take up the appeals.
2. The appellants are manufacturers of excisable goods. They pay service tax on Goods Transport Agency's Service (GTA service, for short) received in connection with inward movement of their inputs. They also pay similar tax on similar service received in connection with outward movement of their final products. In both the instances, they are service recipients. During the periods of dispute, which are prior to 19.4.2006, the appellants utilized credit of duty paid on inputs and capital goods as also credit of service tax paid on input service, for payment of duty of excise on final products as also for payment of service on GTA service. The utilization of input-duty credit, capital goods credit and/or input service tax credit for payment of service tax on GTA service was objected to by the department. The original authorities sustained this objection and demanded duty equivalent to the credit found to have been wrongly utilized. They also imposed penalties on the assessees. The first appellate authorities upheld the denial of credit to the assessees but vacated the penalties. The present appeals are directed against the orders of the appellate Commissioners.
3. After considering the submissions of learned Counsel and learned SDR, I find that the short question arising for consideration in these cases is whether it was open to the assessees to utilize input-duty credit, capital goods credit and input service tax credit for payment of service tax on GTA service for the respective periods. This question requires to be settled with reference to Explanation to the definition of 'output service' under Rule 2(p) of the Cenvat Credit Rules, 2004. I find that this exercise was done in a similar case viz. R.R.D. Tex (P) Ltd. v. Commissioner of Service Tax, Salem (Appeal No. S/12/2007) and the issue was decided in favour of the assessee vide Final Order No. 606/2007 dated 18.5.2007. The relevant part of the said final order is reproduced below:
3. After hearing both sides and considering their submissions, I find that the short question arising for consideration in this case required to be settled with reference to Explanation to the definition of 'Output service' under Rule 2(p) of the Cenvat Credit Rules, 2004. The definition, with the Explanation, is reproduced below:
"Output service" means any taxable service provided by the provider of taxable 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.
Explanation: For the removal of doubts it is hereby clarified that if a person liable for paying service tax does not provide any taxable service or does not manufacture final products, the service for which he is liable to pay service tax shall be deemed to be the "output service".
It has been pointed out by learned Counsel that the Explanation was omitted on 19.4.2006 and the same was in force during the period of dispute. In the present case, the appellants were only receiving taxable services and not provided any, but they were discharging service tax liability in respect of the 'Goods Transport Agency's Service' received for the inward and outward movement of goods. As per the above Explanation, where a person liable for paying service tax does not provided any taxable service, the service for which he is liable to pay service tax shall be deemed to be 'output service'. Accordingly, the 'Goods Transport Agency's Service' on which the appellants paid service tax shall be deemed to be their 'output service'. It would follow that, for payment of service tax on this 'output service', credit of service tax paid on any input service and/or credit of duty paid on any input or capital goods could be validly availed. The decision to the contra taken by the lower authorities cannot be sustained.
4. In the case of The India Cement Ltd. v. Commissioner of Central Excise, Salem, cited by learned Counsel, a similar question had arisen and this Bench held as under:
By virtue of the Explanation, it shall be deemed to be 'output service'. In other words, the appellants, while paying service tax on GTA service availed in connection with removal of their final product from factory, were doing so on an 'output service' and, therefore, they were entitled to utilize, for payment of service tax on such service, credit of the tax paid on the input GTA service availed by them in connection with receipt of inputs into their factory.
The Explanation referred to in the above order of this Bench (Final Order No. 262/07 dated 20.3.2007) is the same as what has already been discussed earlier in this order. Even without reference to the Explanation, a learned Single Member of the Tribunal at Delhi allowed similar credit to the assessee in the case of Commissioner of Central Excise, Chandigarh v. Nahar Industrial Enterprises Ltd. in Appeal No. 22/2007-NB(SM) dated 7.3.2007 2007-TIOL-555-CESTAT-DEL cited by learned Counsel. Learned SDR has particularly relied on a Circular dated 3.10.2005 of the Board. A part of this circular is seen to have been reproduced in the impugned order. This is a clarification to the effect that, under the provisions of Section 68(2) of the Finance Act, 1994, a person discharging service tax liability is neither the provider of output service nor the manufacturer of final product as required under the Cenvat Credit Rules, 2004. This clarification did not take into account the above Explanation and cannot hold good during the currency of the Explanation.
5. In the result, the impugned order disallowing the credit is set aside and this appeal is allowed.
4. Following the above decision, I set aside the impugned orders and allow these appeals.
(Dictated and pronounced in open court)