Customs, Excise and Gold Tribunal - Tamil Nadu
R.R.D. Tex Pvt. Ltd. vs Commissioner Of Central Excise on 18 May, 2007
Equivalent citations: [2007]10STJ151(CESTAT-CHENNAI), 2007[8]S.T.R.186, [2007]10STT255
ORDER
P.G. Chacko Member (J)
1. After examining the records and hearing both sides, I am of the view that the appeal itself requires to be disposed of at this stage. Accordingly, after dispensing with predeposit, I proceed to deal with the appeal.
2. The appellants are manufacturers of cotton yarn. They pay Service Tax on "Goods Transport Agency's Service" 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 product. In both the instances, they are service recipients. During the period of dispute (July to September, 2005), for the payment of this tax, they utilised credit of duty paid on inputs and capital goods as also credit of Service Tax paid on input services. This was objected to by the department. Both the lower authorities, sustained this objection and demanded Rs. 12,849/- equivalent to the credit found to have been 'wrongly' utilised for the above period. The penalty imposed on the appellants by the original authority was, however, vacated by the appellate authority. The present appeal is directed against denial of the CENVAT credit.
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 19.04.2006 and the same was in force during the period of dispute. In the present case, the appellants were only receiving taxable services and not providing 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 provide 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 their final product from factory, were doing so on an "output service" and, therefore, they were entitled to utilise, 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 20.03.2007) 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 of 2007-NB(SM) dated 07.03.2007 2007-TIOL-555-CESTAT-DEL cited by learned Counsel. Learned SDR has particularly relied on a circular dated 03.10.2005 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.
(Dictated and pronounced in open court)