legal fiction to utilise the CENVAT credit

A person who is not a actual service provider, but discharges the Service Tax liability on the notified taxable services under Section 68(2) of the Finance Act, 1994 read with Notification No. 36/2004 dated 31.12.2004 and Rule 2(1)(d) of Service Tax Rules, 1994 as a deemed service provider, is entitled, by virtue of the legal fiction to utilise the CENVAT credit availed on inputs/input services/capital goods for payment of service tax on Goods Transport Agency (GTA) Services, even though such inputs/input services/capital goods were not used for providing such taxable services

The court has relied on CCE. v. Nahar Industrial Enterprises Ltd., where it was held that

there is no legal bar to the utilisation of Cenvat credit for the purpose of payment of service tax on the GTA services.

Apart from the above, even as per Rule 3(4) (e) of the Cenvat Credit Rules, 2004 the Cenvat credit may be utilised for payment of service tax on any output service.

In the present case also, the service tax was paid out of the Cenvat credit on GTA services and hence the respondents were well within their right to utilise the Cenvat credit for the purpose of payment of service tax. The Commissioner (Appeals) as well as the Tribunal has rightly held that the respondents were entitled to pay the service tax from the Cenvat credit.

Commissioner of Central Excise, Chandigarh v. Deepak Spinners Ltd. (High Court Of Himachal Pradesh)