COMMISSIONER OF CENTRAL Vs. FLOWSERVE MICROFINISH PUMPS PVT.

JUDGEMENT

(1.) BOTH these Revenue appeals raise a common question of law and facts and hence, they are taken up together for disposal as per law. The Commissioner (A) has decided four appeals against four different units on same issue. He has set aside the Orders -in -Original by which the Service Tax had been confirmed by denying the Cenvat credit availed towards payment of Service Tax and Education Cess on GTA Service. The Department took the view that the assessees were not eligible to avail/utilize Cenvat credit for payment of Service Tax on GTA Services, as the appellants were not provider of taxable services but a person responsible for making payment of Service Tax. The Commissioner (A) took the view that the assessee ought to be considered as person liable to pay Service Tax in terms of Rule 2(1)(d)(v) of the Service Tax Rules, 1994 as they were paying Service Tax on the services received by them, in terms of the explanation to Rule 2(p) of the Cenvat Credit Rules, 2004 and hence, he considered such payments as output services for the assessee. He noted that when it is considered as output service, there is no restriction under Rule 2(4) of Cenvat Credit Rules, 2004 to utilize the same as credit. He upheld the utilization. He had also noted the definition of "Output Services" as per Rule 2(p) as it stood prior to 19.4.2006 and "provider of taxable service" as per Rule 2(r) to claim Goods Transport Services is both input and output services in their cases and they were eligible and entitled to accumulated credit of duty paid on input services of Goods Transport Services for paying duty on output services of Goods Transport Services. In other words, he held that the assessee paid Service Tax on Goods Transport Services, take credit of it and use the same credit for paying Service Tax for next installment of Service Tax on Goods Transport Services. He noted that they did not actually provide any such output services, but used credit for paying Service Tax on Goods Transport Service under the shelter of deeming provision referred to by him as above. He has also noted that the issue has been directly addressed by CBEC in their Circular No. 345/4/2005 -TRU dated 3.10.2005. Revenue is aggrieved with this order.

(2.) REVENUE contended that as per Rule 3(4)(e) of Cenvat Credit Rules, 2004, the Cenvat credit can be utilized for payment of "Service Tax on output service". It is stated that "output service" means any taxable service provided by the provider of taxable service to a customer, client, subscriber, policyholder or any other person, as the case may be and the expressions "provider" and "provide" shall be construed accordingly. It is stated that the assessee were only manufacturers of excisable goods and they were not providing any taxable service. They had obtained Service Tax Registration for discharge of their service tax liability on GTA services (input service) in terms of Section 68(2) of Finance Act, 1994. Therefore, they have not obtained any Service Tax Registration for discharge of tax liability under Section 68(1) of the Finance Act, 1994 and hence, they were not eligible for availing the Cenvat credit and therefore the order is not legal and proper.

(3.) THE learned JDR took me through the grounds raised in the appeal memo and urged for setting aside the order and confirming the Order -in -Original.