1. After examining the records and hearing both sides, I am of the view that the appeal itself requires to be disposed of at this stage. Accordingly, after dispensing with predeposit, I proceed to deal with the appeal.

2. The appellants are manufacturers of cotton yarn. They pay service tax on "goods transport agency’s service" received in connection with inward movement of their inputs. They also pay similar tax on similar service received in connection with outward movement of their final product. In both the instances, they are service recipients. During the period of dispute (July to September, 2005), for the payment of this tax, they utilised credit of duty paid on inputs and capital goods as also credit of service tax paid on input services. This was objected to by the department. Both the lower authorities, sustained this objection and demanded Rs. 12,849 equivalent to the credit found to have been ‘wrongly’ utilised for the above period. The penalty imposed on the appellants by the original authority was, however, vacated by the appellate authority. The present appeal is directed against denial of the CENVAT credit.

3. After hearing both sides and considering their submissions, I find that the short question arising for consideration in this case required to be settled with reference to Explanation to the definition of "output service" under rule 2(p) of the CENVAT Credit Rules, 2004. The definition, with the Explanation, is reproduced below:-

"‘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 ‘provided’ shall be construed accordingly.

Explanation.-For the removal of doubts it is hereby clarified that if a person liable for paying service tax does not provide any taxable service or does not manufacture final products, the service for which he is liable to pay service tax shall be deemed to be the output service."

It has been pointed out by learned counsel that the Explanation was omitted on 19-4-2006 and the same was in force during the period of dispute. In the present case, the appellants were only receiving taxable services and not providing any, but they were discharging service tax liability in respect of the "goods transport agency’s service" received for the inward and outward movement of goods. As per the above Explanation, where a person liable for paying service tax does not provide any taxable service, the service for which he is liable to pay service tax shall be deemed to be ‘output service’. Accordingly, the "goods transport agency’s service" on which the appellants paid service tax shall be deemed to be their "output service". It would follow that, for payment of service-tax on this "output service", credit of service tax paid on any input service and/or credit of duty paid on any input or capital goods could be validly availed. The decision to the contra taken by the lower authorities cannot be sustained.

4. In the case of India Cement Ltd. v. CCE cited by learned counsel, a similar question had arisen and this Bench held as under :-

"By virtue of the Explanation, it shall be deemed to be ‘output service’. In other words, the appellants, while paying service tax on GTA service availed in connection with removal, their final product from factory, were doing so on an ‘output service’ and, therefore, they were entitled to utilise, for payment of service tax on such service, credit of the tax paid on the input GTA service availed by them in connection with receipt of inputs into their factory."

The Explanation referred to in the above order of this Bench (Final Order No. 262/07, dated 20-3-2007) is the same as what has already been discussed earlier in this order. Even without reference to the Explanation, a learned Single Member of the Tribunal at Delhi allowed similar credit to the assessee in the case of CCE v. Nahar Industrial Enterprises Ltd. in