By TIOL News Service

AHMEDABAD, APR 04, 2014: THE following issue is referred before the Larger Bench : -

"Whether a person who is not a actual service provider but discharges the service tax liability on the taxable Service under Section 68(2) of the Finance Act, 1994 as a deemed service provider, is entitled by virtue of legal fiction to utilize the CENVAT credit inputs / input services / capital goods for payment of Goods Transport Agency service tax, even if he is not using such inputs/ input services/ capital goods for providing taxable services by virtue of deeming legal fiction?"

Appellants are engaged in the business of manufacturing of excisable goods. They are also liable for payment of service tax under the Goods Transport Agency service. The appellants utilize the CENVAT credit given to them for their manufacturing activities for payment of service tax on GTA service. The case of the Revenue is that the CENVAT credit could not be utilized for payment of CENVAT payable on services rendered and this should have been paid in cash.

The larger Bench noted that the dispute in this case pertains to the period prior to 01.3.2008 when there is no bar for such utilization. This issue has now been settled by the decisions of various High Courts.

The High Court of Punjab & Haryana had in case of Nahar Industrial Enterprises Limited - 2010-TIOL-868-HC-P&H-ST held:

“there is no legal bar to the utilization of Cenvat credit for the purpose of payment of service tax on the GTA services.

Even as per Rule 3(4) (e) of the Cenvat Credit Rules, 2004, the Cenvat credit may be utilized for payment of service tax on any output service.

The service tax was paid out of the Cenvat credit on GTA services and, hence, the respondents were well within their right to utilize the Cenvat credit for the purpose of payment of service tax"

In view of the above, the question referred to is answered in favour of the assessee.

(See 2014-TIOL-510-CESTAT-AHM-LB)