Service Tax is an enigma. It has shown to the authorities that you could tax the largest area of the economy without having a codified regulation. It has shown to the tax administrators that it’s far higher to tax with out a regulation as regulation reduces your discretion. The only victim is tax assessee- however in any case, regulation or no regulation, they may be there to suffer.
The administration of Service Tax display advert-hocism at its zenith. In this ad hocism the method of accumulating Service Tax on Goods Transport Operator is excessive factor in enforcing uncertainty- I even have heard uncertainty of regulation is the greatest cruelty. The service tax administrator has forgot this cliche.
Article 265 of the Constitution said that no tax shall be levied or amassed shop by means of authority of law. No person can argue that provider tax is being accumulated without authority of law- after all there are numerous clauses of Finance Act of numerous years authorizing levy and collection of provider tax. So what if these clauses are not clean-Article 265 did not check with clear law. So what if those clauses aren’t certain- Article 265 did no longer discuss with sure law. Thus I am sure that administration of carrier tax isn’t in any respect violating any word of the Article 265 of the Constitution. And spirit of any regulation is or turned into in no way important to the tax directors.
And then I observed an article written through a found out tax administrator in this esteemed journal (GTA-Liability to pay Service Tax and Credit thereon, 2006 (2) STR J147]. The found out creator argued that liability to pay carrier tax is not the simplest criterion to avail credit. I can not agree more. But I differ from him on numerous counts. This paper is an attempt to study the prison provision (howsoever uncertain they are) with appreciate to Cenvat Credit on provider tax paid on outward freight provider- that is freight on transportation of goods after clearance from manufacturing facility gate, after the area of removal, after the Central Excise responsibility has been paid.
I trust the discovered author that liability to pay a tax and taking credit score of that unique price of tax are two various things. They are ruled with the aid of specific provisions of regulation. You may additionally pay a tax but you may not get any credit score- like taxes paid on excessive speed diesel. You won’t pay the tax but you may get credit score- we are able to nonetheless recollect various shape of deemed credit to be had to the assessees. Off route fee of tax can be a criterion to permit credit score and in widespread it’s far a criterion.
Credit of service tax is availed underneath Cenvat Credit Rules, 2004. Thus we ought to study those Rules to examine whether credit score of carrier tax paid on outward freight is available to the producer or now not. Rule three(ix) of the Cenvat Credit Rules, 2004, reads as,
RULE three. CENVAT credit.- (1) A producer or producer of final merchandise or a provider of taxable carrier will be allowed to take credit (hereinafter known as the CENVAT credit score) of –
(ix) the provider tax leviable under segment sixty six of the Finance Act; paid on –
(ii) any enter service received with the aid of the producer of very last product or by means of the provider of output offerings on or after the 10th day of September, 2004,
Thus manufacture of very last product will be allowed to take credit of provider tax paid on any “input provider”.
Input provider has been defined as,
2(l). “enter service” means any provider, –
(i) utilized by a issuer of taxable provider for imparting an output provider, or
(ii) utilized by the manufacturer, whether or not directly or in a roundabout way, in or with regards to the manufacture of final merchandise and clearance of final merchandise from the place of removal,