CENVAT CREDIT

Last updated: 20 September 2007

Court :
CESTAT, CHENNAI BENCH

Brief :
Rule 4, read with rule 2(p), of the Cenvat Credit Rules, 2004 - Conditions for allowing CENVAT credit - Period from July, 2005 to September, 2005 - Assessee-company paid service tax in respect of ‘Goods transport agency’s service’ received for inward and outward movement of goods - Whether since assessee was service recipient and was not providing any taxable service, ‘Goods transport agency’s service’ on which assessee paid service tax would be deemed to be its output service by virtue of Explanation to rule 2(p) and, therefore, for payment of service tax on such output service, assessee would be entitled to avail credit of service tax paid on any input service and/or credit of duty paid on any input or capital goods - Held, yes [Para 3] >> Facts The assessee-company was paying service tax on ‘Goods transport agency’s service’ received in connection with the inward movement of its inputs and the outward movement of its final product. For such payment, the assessee utilized credit of duty paid on inputs and capital goods and credit of the service tax paid on input services. The department held that the said credit was wrongly utilized and, accordingly, denying the Cenvat credit, imposed penalty. The appellate authority vacated the imposition of penalty but sustained the denial of Cenvat credit. On appeal :

Citation :
R.R.D. Tex (P.) Ltd. v. Commissioner of Central Excise, Salem

In the instant case, the assessee was only receiving taxable services and not providing any, but it was discharging service tax liability in respect of the ‘Goods transport agency’s service’ received for the inward and outward movement of the goods. As per Explanation to rule 2(p), 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 assessee paid service tax would be deemed to be its ‘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 could not be sustained. [Para 3] Therefore, the impugned order disallowing the credit was to be set aside and the instant appeal was to be allowed. [Para 5]