CX - For period after 19.4.2006, there was no doubt that GTA services cannot be considered as 'output services' by recipient and, therefore, ST under reverse charge could not have been paid through CENVAT credit: CESTAT
By TIOL News Service
MUMBAI, AUG 19, 2016: THE appellant availed services of Goods Transport Operator. During the period 1.6.2005 to 13.7.2006, the appellant paid Service Tax on availing Goods Transport Operator services, on reverse charge basis, by using CENVAT Credit.
A notice was issued seeking to deny the use of CENVAT Credit for the payment of Service Tax on Goods Transport Operator Services.
As the demand was confirmed by the lower authorities, the appellant is before the CESTAT.
It is submitted that at the material time the definition of output services did not exclude the Goods Transport Agency services from its purview.
Inasmuch as at the material time, the definition of output services in rule 2(p) of CCR, 2004 read:-
"(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 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".
And it was only by the notification No. 10/2008- CE(NT) dated 01.03.2008 that the following amendment was made in rule 2(p) of CCR, 2004 -
(ii) in clause (p), for the words "any taxable service provided by the provider of taxable service", the words "any taxable service, excluding the taxable service referred to in sub-clause (zzp) of clause (105) of section 65 of the Finance Act, provided by the provider of taxable service" shall be substituted with effect from the 1st day of March, 2008.
Therefore, the appellants were entitled to utilize the CENVAT Credit for the purpose of Goods Transport Agency services during the impugned period, it was submitted.
Reliance is also placed on the decision in Shiv Tubes & Steels Pvt. Ltd. - 2011-TIOL-147-CESTAT-BANG in support.
The AR relied on the decisions in Alstom Projects India Ltd. - 2008-TIOL-2853-CESTAT-MAD, Echjay Forgings Pvt. Ltd. - 2012-TIOL-2093-CESTAT-MUM to bolster the department stand.
The Bench observed -
" 4. …I find that there are decisions both sides. Rule 2 (p) of the Cenvat Credit Rules at the material time 1.6.2005 to 18.4.2006 read as under:-
"(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 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".
With effect from 19.4.2006 the explanation was omitted. In the case of Alstom Projects India Ltd. (supra), para 3 & 4 of the said order sums up the issues to be examined by interpreting Rule 2(p) of the Cenvat Credit Rules. The said paras read as under:-
x x x
It is seen that the said observations clearly spelt out as to circumstances in which it can be allowed and when it cannot be allowed. I find that the same argument has been followed by the Tribunal in the case of Echjay Forgings Pvt. Ltd. (supra) and ITC Ltd. (supra). Following the said decision, I find that during the said period, the appellant being manufacturer / provider of service, could not have utilized the credit of CENVAT for payment of Service Tax on Goods Transport Agency services.
4.1 It is seen that the Explanation to the definition of "output service" was omitted by Notification No. 8/2006-CE (NT) dated 19.4.2006, "Output services" thereafter only included the taxable services provided by a provider of taxable service to a customer, client, subscriber etc. After omission of the explanation, the possibility of the services received to be considered as an output service no longer remained. Thus, for the period after 19.4.2006, there was no doubt that the Goods Transport Agency services cannot be considered as output services by the recipient."
In fine, the Bench allowed the appeal partially for the period prior to 19.04.2006 and for the latter period till 13.07.2006 the demand and penalty were upheld.
(See 2016-TIOL-2115-CESTAT-MUM )
