CESTAT, AHMEDABAD BENCH
Commissioner of Central Excise, Rajkot
ORDER NOs. A/267/WZB/AHD/2012 & S/287/WZB/AHD of 2012
APPLICATION NO. ST/S/1319 of 2011
APPEAL NO. ST/581 of 2011
FEBRUARY 24, 2012
1. This stay petition is filed for the waiver of pre-deposit of the amounts confirmed by the adjudicating authority and upheld by the first appellate authority. I find that an identical issue of the appellant was considered by the Bench in Appeal No. ST/439/10 an unconditional stay was granted. Following the same, I allow the applications for waiver of pre-deposit of the amounts involved and since Appeal No. ST/439/10 is listed today for final disposal, I take up the appeal Nos. ST/581/11 & ST/439/10 for disposal. Since the issue involved in both the appeals are same, they are being disposed of by a common order.
2. Heard both sides and perused the records.
3. The relevant facts that arise for consideration in these appeals are during the period April 2008 to March 2009, the appellant herein had received the services of GTA and as per the provisions of Section 66A read with Section 68(2) of the Finance Act, 1994, appellant is liable to discharge service tax liability on such services received by him. The appellant in this case has utilized the cenvat credit availed by him on the input services for discharging of service tax liability under GTA services. Revenue is on the view that appellant should have paid the service tax liability on the GTA services by cash and could not have utilized the cenvat credit for doing so. The appellant’s appeal before the first appellate authority in both the cases failed. Hence these appeals.
4. Heard Ld. Counsel for the appellant. Ld. Counsel would submit that the following judgments of the Tribunal squarely covers the issue in his favour.
1. Mohini Industries v. CCE  23 STT 466 (New Delhi – CESTAT).
2. CCE, C & ST, Raigad v. Lakeland Chemicals (India) Ltd.  24 STT 243 (Mum. – CESTAT).
3. Pragathi Automation (P.) Ltd. v. CST [Stay order No. 1198 of 2008, dated 10-12-2008].
4. Modipon Ltd. v. CCE [Stay order No. 9 of 2010-SM(BR)(PB), dated 21-12-2009].
5. CCE v. Nahar Industrial Enterprises Ltd.  21 taxmann.com 106/35 STT 391 (Punj. & Har.).
6. CCE v. Vulcan Gears  23 STT 472 (Ahd. – CESTAT).
7. CCE v. Nova Petrochemicals Ltd. [Order Nos. A/2246 – 2249/WZB/AHD/2011, dated 8-12-2011].
5. It is his submission that the demand of the service tax liability be set aside and appeals be allowed.
6. Ld. SDR on the other hand would submit that the issue involved in this case has been firmly set up by the Tribunal in the case of ITC Ltd. v. CCE [Final order no. 237 of 2011, dated 29-3-2011]. It is his submission that the GTA services which are received by the appellant are not considered as output services at all by Rule 2(p) of Cenvat Credit Rules, 2004. He would submit that they should be directed to pay the amount through the PLA and should not be allowed to utilize the Cenvat credit for discharging of service tax liability.
7. I have considered the submissions made at length by both sides and perused the records.
8. The issue involved in this case is regarding whether the appellant being recipient of GTA services, is entitled to utilize the Cenvat credit availed by him on the service tax paid on the input services for the purpose of discharging the service tax liability on the GTA services.
9. It is undisputed that the appellant is liable to discharge the service tax liability on the GTA services as a recipient of the services. It is also undisputed that the appellant has availed the Cenvat credit and the service tax paid on the services for input services utilized by him in his activity of business of exports.
10. The provisions of Rule 2(p) of the Cenvat Credit Rules with effect from 01.03.08 reads as under:
“Rule 2(p) – “output service ” means 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, 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.”
11. It may be seen from the above reproduced provisions of Rule 2(p) of the Cenvat Credit Rules, 2004 the output service has been defined categorically excluding the services of GTA services from 01.03.08 which would mean that though the liability to pay the service tax on the GTA services received is on the appellant, the said activity of discharging of service tax liability, from 01.04.08 will not be considered as an output service provided by the appellant. If that be so, the activity of the appellant in debiting the amount in his RG 23 A Pt-II or the Cenvat account seems to be erroneous.
12. Since the appellant is not providing output services as categorized in Rule 2(p) of the Cenvat Credit Rules, 2004, debiting the said amount in the Cenvat account needs to be rectified by directing the appellant to debit or pay the entire amount invoked in both the appeals as service tax paid for receipt GTA services through PLA or by TR-6 challan. The said amount, if discharged by the appellant within thirty days from today, on such payment of service tax liability by debit in PLA/TR-6 challan, the appellant is eligible to avail the Cenvat credit which he has debited during the relevant period, towards discharge of service tax liability.
13. Now coming to the interest liability on the said amount, which has been confirmed by the adjudicating authority and upheld by the first appellate authority, I find that this Bench in the case of Vulcan Gears (supra) has specifically held, which I may with respect reproduce.
4. The learned SDR submits that the Commissioner has wrongly relied upon the decision m case of M/s. Bhushan Power Steel Ltd. [2008 (10) S.T.R. 18 (Tribunal)] wherein Tribunal has set aside the order requiring the appellant to pay the amount in cash totally. This issue is before Larger Bench whereas in this case, it is only interest since the liability has been acceded. I find that the learned Consultant on behalf of the respondents has agreed to pay in cash to end the litigation. I also note that by reversing the Cenvat credit, the appellant was not retaining any money belonging to the Government and by payment in cash and reversal of debit entry, only procedural irregularity was rectified. The liability of interest had been prescribed where the appellant retains the money which may be due to be paid to the Government which is not the case here. I find considerable force in the argument advance by the learned Consultant, Strictly going by the law, interest may be due, but the fact remains that by reversing the Cenvat credit, the respondents had committed a procedural irregularity only and therefore reversal of the same and payment in cash would be sufficient. The question of penalty would arise depending upon the facts of each case and in this case, the department is not even in appeal against setting aside penalty. In view of the approach adopted by the party to end litigation by rectifying the Procedural irregularity voluntarily even when knowing that the matter was before Lager Bench, I feel that it would be in the interest of justice to settle the issue and accordingly the appeals filed by the Revenue are rejected.
14. It is seen that the facts of the current case are before me are identical to the facts as were in Vulcan Gears. In view of this, there being no intention to run away from the service tax liability and having deposited the same through the Cenvat account, the appellant has not retained any part of the government dues with him with intention to evade the same. Accordingly, the interest liability as confirmed by the lower authorities does not arise at all. In view of this, the interest liability, if any, on the amounts in these appeals is liable to be set aside and I do so.
15. As regards penalties imposed by the lower authorities under the provisions of section 76 of the Finance Act, 1994, I find that the said provisions will not apply at all as the appellant had discharged the service tax liability through the Cenvat account. Be that as it may, the appellant having discharged the service tax liability through Cenvat account. I am of the view that the penalties imposed by the lower authorities are not warranted and are liable to be set aside and I do so. The penalties imposed by the lower authorities on the appellant are set aside.
16. Accordingly, in sum, the appeal of the appellant claiming that to the extent they are eligible to use the Cenvat credit for the discharge of service tax liability on the GTA services as recipient of services is rejected and they are directed to pay the amount of service tax liability by debit in PLA/TR-6 challan as indicated hereinabove and the appeal against imposition of interest and penalty, in these cases are allowed.