CESTAT, AHMEDABAD
BENCH
Commissioner
of Central Excise,
v.
Adishiv Forge (P.) Ltd.
M.
Veeraiyan, Technical Member
Order Nos. A/3088 to
3109/WZB/Ahd./2007
Appeal Nos. ST/15 to
22, 24 to 32, 37, 38, 58 to 60 of 2007 & Others
December 18, 2007
CENVAT CREDIT
Rule 3 of the Cenvat Credit Rules, 2004 - Cenvat credit - General - Assessee was a manufacturer of
excisable goods - It availed goods transport agency (GTA) service for receiving
raw materials in factory as well as for sending finished goods from factory -
In some cases, assessee paid service tax on incoming consignments, and in some
cases, on outgoing consignments - Assessee took credit of tax paid and utilized
same in discharging liability of service tax and excise duty which original
authorities disallowed - Whether in respect of incoming consignment, assessee
continued to be recipient of GTA service and such service being input service,
assessee would be eligible to take credit of tax so paid - Held, yes - Whether
in respect of outgoing consignment, assessee would not be eligible to take
credit of tax paid because assessee paid tax only as consignor and not as
provider of GTA service - Held, yes - Whether assessee while paying service tax
on GTA service availed in connection with removal of its finished goods from
factory was entitled to utilize, for payment of service tax on such service,
credit of tax paid on input GTA service availed by it in connection with
receipt of inputs received in its factory - Held, yes - Whether restriction
envisaged in Notification No. 32/2004 about non-availment
of Cenvat credit should be in respect of service
provider of GTA services and cannot be applied to recipients of services merely
because they were required to pay service tax - Held, yes - Whether
notwithstanding taking of credit of service tax paid under goods transport
operator/agency services in respect of incoming consignments, respondent was
eligible to avail benefit of Notification No. 32/2004-ST, dated 3-12-2004 -
Held, yes
Circulars and Notification : Notification No. 32/2004-ST, dated 3-12-2004
>> Facts
The assessee was
manufacturer of excisable goods. It availed the services of goods transport
agency. In some cases, the assessee paid the service tax as deemed service
provider. The assessee had taken credit of the service tax paid and utilized
same towards discharging its liability of both service tax and excise duty. The
original authority held that the service tax paid by it as deemed service
provider could not be treated as tax paid on input service. He, therefore, held
that service tax so paid was not permissible as credit under rule 3(4) and,
accordingly, disallowed the varying amounts of credit and ordered recovery of
interest. He also imposed penalties under rule 15. On appeal, the Commissioner
(Appeals) allowed the credit holding that there was no restriction on
utilization of the Cenvat credit towards payment of
service tax on GTA services.
On revenue’s appeal :
>> Held
The order of the
original authority lacked clarity on certain relevant facts. It was not clear
as to whether the credit had been taken by the respondent in respect of service
tax paid by it in relation to incoming consignments or for outgoing
consignments as well. It was not clear whether the credit taken on input
services was sought to be denied for utilization in respect of service tax paid
in relation to outgoing consignments of finished goods. [
The respondent was
manufacturer of excisable goods and registered, accordingly, with the excise
authorities. It was also registered with the excise authorities as service tax
assessee. It received various raw materials from different persons and for the
said purpose it used the services of goods transport agency. In respect of such
receipts, the freight might be paid either by the consignors, or the consignee
who was the respondent. If the freight was paid by the consignor of the raw
materials, naturally the consignor was required to pay the service tax. If the
freight was to be paid by the consignee (the respondent), the consignee was
required to pay the service tax on the same. In respect of freights paid on
such consignments, the service tax had been paid by the respondent. In respect
of service tax on the freight paid for receiving inputs/raw materials, the
consignor or the respondent as consignee, was eligible to take credit of the
service tax paid. [
The respondent was
dispatching its finished goods to various consignees either from the factory
gate or from its depots which were considered as ‘place of removal’. The
freight might be paid either by the respondent as consignor or by the recipient
of the finished goods who were the consignees. In cases where the freight was
paid by the respondent as consignor it was required to pay the service tax. But
such service tax related to output services. The said output services were
rendered only by the goods transport operators/agencies. The respondent was
required to pay service tax only as consignor and that did not make it as
provider of goods transport operator’s services and, therefore, the question of
its taking credit did not arise. The credit of service tax paid by the
respondent as consignor would be available to the consignees of the finished
goods. In the case where the respondent did not pay the freight, the question
of its paying service tax did not arise and the same would be paid by the
consignees and the credit would be available to the consignees of the finished
goods as their input service credit. [
The respondent was
playing two major roles. Undoubtedly, it was recipient of services under the
category of goods transport agencies. Section 68(2) and the rules made thereunder shifts the responsibility of paying the service
tax on it. Because of that deeming provision which made it responsible for
paying the tax, it did not cease to be recipient of services. For the purpose
of the Cenvat credit, the duty paid by it as deemed
service provider should be treated as tax paid on input services and it should
be extended the benefit of the Cenvat credit. In
other words, the goods transport service in relation to receipt of inputs in
the factory has to be considered as input service. Whether the service tax was
paid by the consignor of the inputs or by the respondent did not make any
difference insofar as eligibility for credit of the duty paid was concerned.
The nature of input service does not undergo a change merely because the tax is
paid by the recipient. Similarly, merely because the respondent paid the
service tax in respect of goods transport services availed for dispatching its
goods to various consignees, the service did not become input service and it
did not become service provider. [
According to the
Notification No. 32/2004-ST, dated 3-12-2004 effective from 1-1-2005, the
service tax on the GTA services are payable on a value which is 25 per cent of
the freight amount paid, i.e.,
after availing 75 per cent abatement. To avail the benefit, a condition is
required to be fulfilled. The condition is that the Cenvat
credit should not have been availed on the GTA services. The restriction
envisaged in Notification No. 32/2004 about non-availment
of the Cenvat credit should be in respect of the
service provider of the GTA services and cannot be applied to the recipients of
services merely because they were required to pay the service tax. The
respondent might be paying the service tax in respect of the services of goods
transport operators service in respect of consignments dispatched by it to its
various customers. Therefore, denial of the credit on the ground that the
respondent was availing the credit of the tax paid by it in respect of input
services was not justified. [
In respect of the goods
transport agency services, the service provider is undoubtedly goods transport
agency. However, the liability to pay tax in certain cases has been shifted to
either the consignor or to the consignee, depending upon who actually paid the
freight. In other cases where neither the consignee nor consignor is required
to pay the service tax, the responsibility for paying service tax continues
with the concerned goods transport agency. The condition of not taking ‘credit
of duty paid on inputs of capital goods used for providing such taxable
service’ necessarily should relate to the services actually rendered by the
transport agency. The respondent had not actually rendered the said services;
as a consignor it had not availed the credit of duty paid on inputs or capital
goods for providing such taxable services; the respondent merely paid the tax
which, in the normal course, should have been paid by the transport agency. [
Therefore, (a) the service tax on goods transport
agency service paid by the respondent did not make it as service provider; (b)
in respect of services availed for incoming consignments for which the
respondent paid the service tax, it continued to be service recipient and,
therefore, such services were input service for it; (c) the service tax
paid by the consignor/respondent in respect of incoming consignments would be
eligible as credit; (d) the service tax paid by the respondent in
respect of outgoing consignments of finished goods in its capacity as
consignor, would not be eligible as credit to the respondent; (e) the
respondent while paying service tax on GTA service availed in connection with
removal of its finished goods from factory was entitled to utilize, for payment
of service tax on such service, the credit of tax paid on the input GTA service
availed by it in connection with receipt of inputs received in its factory; (f)
notwithstanding taking of credit of service tax paid under goods transport
operator/agency services in respect of incoming consignments, the respondent
was eligible to avail the benefit of the Notification No. 32/2004-ST, dated
3-12-2004; and (g) therefore, in the given facts and circumstances of
the case, which involved interpretational difference, imposition of penalty was
not justified. [
Thus, the original
authority would re-determine the credit eligibility after giving reasonable
opportunity of hearing to the assessee. [