Custom, Excise & Service Tax Tribunal
Cce, Tirupathi vs M/S. Super Spinning Mills Ltd on 30 March, 2010
CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL
SOUTH ZONAL BENCH AT BANGALORE
Bench SMB
Court I
Date of Hearing: 30/03/2010
Date of decision:30/03/2010
Appeal No.ST/245/08
(Arising out of Order-in-Appeal No.14/2008(T)ST dt. 28/2/2008 passed by Commissioner(Appeals), Guntur)
For approval and signature:
Honble Mr. M.V.Ravindran, Member(Judicial)
1.
Whether Press Reporters may be allowed to see the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982?
No
2.
Whether it should be released under Rule 27 of the CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not?
No
3.
Whether their Lordship wish to see the fair copy of the Order?
Seen
4.
Whether Order is to be circulated to the Departmental authorities?
Yes
CCE, Tirupathi
..Appellant(s)
Vs.
M/s. Super Spinning Mills Ltd.
Respondent(s)
Appearance Mr. M.M.Ravi Rajendran, JDR for the Revenue.
Mr.K.Ravi, Advocate for the respondent.
Coram:
Honble Mr. M.V.Ravindran, Member(Judicial) FINAL ORDER No._______________________2010 Per M.V.Ravindran This appeal is filed by the Revenue against the Order-in-Appeal No.14/2008(T)ST dt. 28/2/2008.
2. Heard both sides and perused records.
3. Revenue is aggrieved by the impugned order on the ground that the ld. Commissioner(Appeals) has set aside the Order-in-Original which has confirmed the demand of service tax payable by the respondent. It is the contention of the Revenue that the service tax which is payable by the respondent as recipient of the GTA service ought to have been discharged by them by payment in cash i.e. TR6 challans and they could not use the cenvat credit for discharge of service tax liability. Ld. Commissioner(Appeals) has set aside the order by wrongly interpreting the law.
4. The Revenues contention in the grounds of appeal are as hereunder:-
a. The Commissioner(Appeals) s OIA, setting aside the order of the original, appears to be not legal and proper and hence is liable to be set aside.
In terms of Rule 2(i) of Cenvat Credit Rules, 2004,, input service means any service
iii) used by a provider of taxable service for providing an output service Or,
(iv) used by the manufacturer, whether directly or indirectly, in or in relation to the manufacture of final products and clearance of final products from the place of removal and includes services used in relation to .procurement of inputs, activities relating to inward transportation of inputs and outward transportation upto the place of removal In view of the above definition, the services utilized by the assessee towards inward transportation of inputs falls under the category of input service.
Rule 3(4) of Cenvat Credit Rules is as follows:
(4). the cenvat credit may be utilized for payment of
(a) service tax on any output service In terms of the above definition the Cenvat credit can be utilized towards the payment of Service tax on output service only. There is no facility to utilize the Cenvat credit for payment of Service Tax on input service.
b. Rule 2(p) of Cenvat Credit Rules 2004 and explanation thereof which was in vogue till 18.04.2006 is as follows:
(P). Output service means any taxable service provided by the provider of taxable service to a Customer, client, subscriber, policy holder of any other person, as the case may be, and the expressions provider and provided shall be construed accordingly:
Explanation: For removal of doubts, it i,s 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.
The above explanation was omitted by Notification No. 8/2006-CE(NT) dt 19.04.2006. Hence the status of deemed output service for the payment of service tax paid by the assessee as a person liable to pay service tax has been done away with the omission of explanation to Rule 2(r) . The payment of tax to be made by the assessee in the instant case is on an input service in terms of rule 2(1) and there is no rule or deeming provision to treat the freight payable by the assessee as output service . It is clear that deeming provision is provided for a person and not for service. In terms of Rule 3(4)(e) of Cenvat Credit Rules, the utilization of Cenvat Credit is not based on the class of persons. The utilization is with respect to the nature of service i.e Output Service. In the subject case itis quite evident that the liability of service tax cast on the assessee is for payment of input service only. Hence, the assessee cannot take any shelter under Rule 2 (r) of Cenvat credit rules 2004 for utilization of Cenvat Credit.
c. The benefit of exemption provided under notification No. 32/2004.ST and 1/2006-ST and CBECs Section 37B order no. 5/1/2007-ST F.No. 166/13/2006-CX4 dt 12.03.2007 have no bearing on the subject case as they speak about the exemption provided to value of taxable service for the purpose of levy of service tax on the Goods Tansport Agency Service.
d. Further, as mentioned above as per rule 3(4)(e) of Cenvat Credit Rules 2004, credit may be utilized for payment of service tax on any output service. In terms of rule 2(1 )(d)(v) of service tax rules read with section 68 of finance Act 1994 in relation to goods Transport Agency the person liable for paying service tax is the consignee or consignor who is liable to pay the freight.
f. This legal provision only creates a liability to pay the service tax. This does not in any way change the input service into an output service. The argument of the Commissioner(A) that in this case the service tax payer has become deemed service provider and thus he is entitled to pay service tax through Cenvat Credit Account is far fetched and does not appear to be logical. By no stretch of imagination one can say that the input service will become output service simply because the consignee is made liable to pay the service tax on goods Transport Agency service. The nature of service would not change.
g. It is also pertinent to mention that vide para 8.1 of Circular No. 97/8/2007 dt 23.08.2007, it has been clarified that to form output service, taxable service has to be actually provided by the provider of taxable service. Even f 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 consequentially a provider of service 9, it cannot be said that he has actually provided any taxable service. The service provided by a Goods Transport Agent (GTA) for which the consignor or the consignee is made liable to pay service tax does. not become an output service for such consignor or the consignee. Therefore, the service tax payable by the consignor or consignee on transportation of goods by road cannot be paid through credit accumulated by such consignor or consignee h. In view of the reasons stated above, it is prayed that the Order-in-Appeal No.14/2008- (T) ST dt 28-02-2008 passed by the Commissioner (Appeals), Guntur in the ease of M/s. Super Spinning Mills Ltd, A Unit, Hindupur may be set aside and pass appropriate orders as they deemed fit.
5.1. Ld. Counsel appearing on behalf of the respondents submits that the issue today stands settled by the following decisions of the Tribunal.
a. Mahindra Ugine Steel Co. Ltd. Vs. CCE, Raigard [2008(12) STR 159 (Tri. Mum.)] b. CCE, Nagpur Vs. Visaka Industries ltd. [2007(8) STR 231(Tri. Mum.)] c. Ambattur Petrochem Ltd. Vs. CCE, Raipur [2008(9) STR 53(Tri. Del.)] 5.2. It is also his submission that the period involved in this case is prior to 1/3/2008. It is his submission that the definition of the output service was amended from 19/4/2006 but the definition provider of taxable service was not amended in order to incorporate the changes which is sought to be Rule 2(p) of the Cenvat Credit Rules.
6. I have considered the submissions made by both sides and perused the records. I find that ld. Commissioner(Appeals) while holding that the Order-in-Original needs to be set aside has recorded the following findings:-
6. I have gone through the records of the case and the submissions made by the applicant. The appellant is a service receiver of GTA service. However, they are liable to pay service tax for the service received by them in terms of Section 68(2) of Finance Act, 1994, read with Rule 2(1)(d)(v)(a) of Service Tax Rules, 1994. During the period April 2006 to September 2006, appellant has discharged their tax liability on the receipt of the above services by payment through their Cenvat credit account. The same has been objected to by the department on the ground that being the service receiver, they cannot utilize the Cenvat credit for payment of tax on service received. Duty, interest and penalty have been confirmed /charged/imposed for the same.
7. Factually the appellant is a service receiver. But by the legal fiction created through the aforesaid provision, they have to pay the service tax as if they are the service provider. The rights and obligation of the deemed service provider have been clearly stated in Section 68(2) of Finance Act, itself as under:
the service tax thereon shall be paid by such person and in such manner as may be prescribed at the rate specified in Section 66 and all the provisions of this Chapter shall apply to such person as if he is the person liable for paying the service tax in relation to such service.
Thus in the instant case, for the purpose of payment service tax, the appellant has to be a treated as a service provider in respect of the services in question. When a Section of the Act itself creates a legal fiction as clear as this, there is no room for doubt whether a manufacturer or service provider can or cannot be treated as a service provider under Rule 2(p) of Cenvat Credit Rules, 2004. Now, a service provider is entitled to pay service tax through the Cenvat credit account under the law; there is no provision in law that a deemed service provider shall be barred from this entitlement. I do not find anything wrong on the part of the appellant in paying the service tax in the instant case through their Cenvat credit account.
7. It can be seen from the above reproduced paragraphs, the ld. Commissioner(Appeals) has read the provisions of the Finance Act, 1994 and the rules made thereunder. It is undisputed that in this case, respondent is recipient of the services of GTA and is liable to discharge Service Tax under deemed fiction i.e. as recipient of the GTA services under Section 68. The definition of provider of taxable for service contemplates provider of taxable service include a person liable for paying service tax. If this is the definition of provider of taxable service, the definition of Rule 2(p) would include the respondent as a provider of taxable service as recipient of the services of GTA. I find that identical issue was decided by the Division Bench of this Tribunal in the case of Mahindra Ugine Steel Co. Ltd. (supra) wherein I was one of the Member. The Bench was at that time considering definition of output service as provided under Rule 2(p) of Cenvat Credit Rules, 2004 before amendment. The ratio of the said decision will cover the issue which is before me as definition of provider of taxable service has not undergone any change during the period in question in this case. Respectfully following the various decisions, I find that the appeal filed by the Revenue is devoid of merits. Appeal filed by the Revenue is rejected.
(Pronounced and dictated in open court) (M.V.Ravindran) Member (Judicial) Nr 10