Output services provide can utlise cenvat credit for payment of service tax on output services

Commissioner of Central Tax Vs Toyota Kirloskar Motors (Karnataka High Court)

Conclusion: Since Toyota was an output service provider therefore, it can utilise cenvat credit for payment of service tax on output services.

Held: The respondent – M/s Toyota Kirloskar Motors claimed to be manufactures of Multiutility Vehicles (MUV) for passenger cars and parts thereof falling under chapter sub-heading 8703.23.10 and 8708.10.90 respectively of the Central Excise Tariff and they were registered under the Central Excise and Service Tax. Respondent – assessee had received intellectual property services, commissioning and installation services and maintenance and repair services from their parent company situated abroad and GTA services from M/s Transystem Logistics International (P) Ltd., Bengaluru. They had utilized the credit availed on inputs, input services and capital goods for payment of service tax on the aforementioned services from April 2006 to August 2006 totaling to Rs.33,30,39,951/-. Commissioner of Central Excise had issued the show cause notice calling upon assessee to show cause as to why the input service tax utilized for payment of service tax on services viz., intellectual property services, commissioning and installation services and maintenance and repair services and also GRA services for the period under consideration should not be treated as irregular and recovery under Section 73 of the Finance Act, 1994, with interest and penalty should not be ordered. The issue arose for consideration was whether the Cenvat Credit can be utilized for payment of service tax for the purpose other than the ones defined under Section 3(4)(e) of the Cenvat Credit Rules, 2004? It was held that following the decision in the case of Union of India v. Kansara Modlers Ltd., reported in 2018(15) GSTL 255 (Raj) the Hon’ble High Court of Rajasthan considering the identical question of law involved herein held that the Tribunal/CESTAT treating the assessee as output service provider was justiciable. The said order had been affirmed by the Hon’ble Apex Court in dismissing the special leave petition filed by the Revenue reported in 2018(18) GSTL J36. Hence, the substantial questions of law were answered in favour of assessee and against the Revenue.

FULL TEXT OF THE JUDGMENT/ORDER of KARNATAKA HIGH COURT

This appeal is filed by the Revenue challenging the order dated 28.6.2018 passed by the Customs, Excise and Service Tax Appellate Tribunal (CESTAT for short) in ST/395/2008-DB (Final Order No.20854/2018), whereby the appeal filed by the respondent – assessee has been allowed.

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