CESTAT, NEW DELHI BENCH
Indian Acrylic Ltd.
Commissioner of Central Excise, Chandigarh II
FINAL ORDER NOS. 1004 – 1006/2012 SM(BR)
APPEAL NOS. E/1048-1050 OF 2011-SM (BR)
JULY 19, 2012
1. All the three appeals are being disposed of by a common order as they arise out of the same impugned orders passed by Commissioner (Appeals).
2. The appellant is a manufacturer of acrylic fibre, acrylic top etc. and were availing the facility of Cenvat credit of duty paid on inputs, capital goods and Service Tax paid on inputs services used in or in relation to manufacture of final products. The appellants are availing the services of foreign agents and were paying commission on said agents located outside India. They were discharging the Service Tax liability in respect of such commission paid to the foreign agents in terms of provisions of Rule 2(1)(d) (iv) and (v). The issue required to be decided in the present appeal is as to whether the appellant can utilise the Cenvat credit so earned by them for discharge of Service Tax liability in respect of overseas commission agent.
3. The lower authorities have denied the utilisation of Cenvat credit availed by the appellant on the capital goods, for the purpose of discharging their Service Tax liability on the ground that the appellant cannot be treated as provider of taxable service. By relying upon the provisions of Rule 3(4)(e) which allows utilisation of Cenvat credit for payment of Service Tax on any output service, the lower authorities have held that inasmuch as the appellant has not provided the services in question, they cannot be held to be service provider and as such, the services in question cannot be held to be output services so as to utilise the credit so earned by them. The stand of the Revenue is that after the deletion of Explanation appearing in Rule 2(p) of Cenvat Credit Rules, which conferred status of output service provider to an assessee, the assessee cannot be held to be a provider of output services. Inasmuch as the said deletion took place on 18.4.06, the appellants are not entitled to utilise the credit.
4. After hearing both sides, I find that period involved in the present appeal is from April, 2007 to September 2008. There are various decisions of the Tribunal as also of various High Courts laying down that the Cenvat credit earned on various input capital goods or input services can be utilised for payment of Service Tax on GTA services. It may not be out of place to mention here that GTA services enjoy the same status as the commission agent to overseas agents inasmuch as in both the cases, it is recipient of the services which is required to discharge the Service Tax liability. However, it is seen that Hon’ble Punjab & Haryana High Court decision in the case of CCE v. Nahar Industrial Enterprises Ltd.  35 STT 391 and Himachal Pradesh High Court decision in the case of CCE v. Auro Spinning Mills [C.E.A. Nos. 9, 12, 13, 15, 16 & 18 of 2008, dated 29-7-2011] laid down a law that Cenvat credit can be utilised for payment of Service Tax on GTA services, by recipient assessee. However, the period in the said decisions was prior to 19.4.06.
5. With effect from 19.4.06, the Explanation to Rule 2(b) of Cenvat Credit Rules which conferred status of output services provided to the assessee liable to pay Service Tax on receipt of services was deleted.
6. The question required to be decided is as to whether such deletion of deeming provision would lead to denial of Cenvat credit utilisation to assessee. Learned DR appearing for the Revenue has relied upon the following decisions of the Tribunal in the case of Iswari Spinning Mills v. CCE  33 STT 68 and Gimatex Industries (P.) Ltd. v. CCE  14 taxmann.com 33 (Mum-CESTAT). The said decisions have held that after 18.4.06, Cenvat credit cannot be utilised for payment of Service Tax on received services.
7. However, we note that the Tribunal in the case of National Engg. Inds. Ltd. v. CCE  32 STT 238 has held that Cenvat credit can be utilised for the period prior to 1.3.08.
8. Similarly, the Tribunal in the case of Shree Rajasthan Syntex Ltd. v. CCE [Final Order Nos. ST/391-392/2011, dated 11-8-2011] has held that such utilisation is in accordance with the law inasmuch as the Rule 2(r) of Cenvat Credit Rules conferred status of service provider to an assessee who paid the Service Tax as a recipient of service…… The later two decisions are by the Division Bench of the Tribunal whereas the decisions relied upon by learned DR are by Single Member Bench, It is also seen that while delivering the decision, Single Member Bench has not taken into consideration the provisions of Rule 2(r). For better appreciation, we reproduce the relevant paragraph and reasoning as adopted by the division Bench in the case of Shree Rajasthan Syntex Ltd. (supra).
“2. It stands contended before us under Rule 3(4) of Cenvat Credit Rules, 2004, Cenvat credit may be utilised for payment of Service Tax on any output services. The question which arises is as to whether the appellant can be said to be the provider of any output services. The term ‘output services’ defined under Rule 2(p) of the Cenvat Credit Rules mean that “any taxable service provided by the provider of taxable service….”. The term ‘provider of taxable service’ has been defined in Rule 2(r) of the Rules to include “a person liable for paying service tax”. It is not in dispute that as recipient of service from goods transport agency, the appellant is liable to pay service tax by virtue of notification under Section 68(2) of the Finance Act, 1994. If the appellant is the person liable to pay service tax, he would be deemed to be provider of taxable service by fiction of law and, therefore, the service provided by him will be deemed to be output service under Rule 2(p) of the Rules.”
9. Admittedly during the relevant period there was no change in the provisions of Rule 2(r). As such by following the division Bench judgment as referred (Supra). I hold that the appellant is entitled to utilise the Cenvat credit for discharge of Service Tax for the commission paid to the overseas agents. Accordingly, the impugned orders are set aside. The appeals are allowed with consequential relief to the appellants.