No Service Tax liability When No provision for Reversing Credit involved on Input Services utilized for Inputs: Orissa HC confirms order of CESTAT [Read Order]

The Orissa High Court confirmed the order of Customs, Excise and Service Tax Appellate Tribunal (CESTAT), wherein it was held that no service tax liability when no provision for reversing credit involved on input services utilized for inputs.

The challenge in the present appeal is to an order of the Customs, Excise and Service Tax Appellate Tribunal, East Regional Bench, Kolkata (CESTAT) allowing S.T. Appeal No.170 of 2010 filed by the Assessee, M/s. Sponge Udyog Pvt Ltd.

The issue before the CESTAT was regarding the justifiability of demand of Rs.6,54,191 of service tax raised on the Assessee disallowing the credit availed on input service attributable to the quantity of iron ore fines and coal fines cleared by the Assessee.

Before the CESTAT, it was argued on behalf of the Assessee that there was no provision in the Finance Act for recovery of service tax involved on GTA Services utilized for bringing the inputs at the time of clearing. Reliance had been placed inter alia on three decisions of the CESTAT itself, one of them being Chitrakoot Steel & Power Pvt. Ltd. v. Commissioner of Central Excise, Chennai.

The decisions of the CESTAT did hold that since there was no specific provision for reversing the credit involved on input services utilized for bringing in the inputs, no service tax liability can be enforced.

The Bench comprising Justice Dr. S. Muralidhar, Chief Justice and Justice M.S. Raman, observed that “On the previous hearing, this Court had inquired from Senior Standing Counsel for the Appellant-Department whether the Department had challenged the order of the CESTAT in Chitrakoot Steel & Power Pvt. Ltd. By the order dated 1st December, 2022 this Court had granted two months’ time to the Department to ascertain the above fact.”

“Considering that this is an appeal of 2011, the Court does not consider it appropriate to grant any further time for this purpose. The Court will proceed on the basis that the Department has accepted the decision of the CESTAT in Chitrakoot Steel & Power Pvt. Ltd” the Court noted.

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