2010 (3) TMI 922 - Commissioner - Service Tax

Summary

Issues:
1. Whether GTA service used for transportation of goods can be considered as input service under Cenvat Credit Rules, 2004.
2. Whether penalty and interest imposed on the appellant are justified.

Analysis:
1. The appellant, engaged in manufacturing excisable goods, availed Cenvat credit for service tax paid on GTA for transportation of raw materials, finished goods, and trading goods. Two show cause notices were issued questioning the availed credits. The lower authority disallowed the credit for transportation of finished goods and imposed penalties. The appellant appealed, arguing that transportation costs are integral to the sale price, relying on various decisions. During the hearing, the appellant presented purchase orders to demonstrate delivery to customers. The main issue was whether GTA service for various transportation scenarios qualifies as input service. The appellant fulfilled conditions prescribed in Circular No. 96/7/2007, and it was concluded that the appellant is entitled to avail Cenvat credit for the disputed services.

2. Regarding penalties and interest, the appellant's belief in availing the credit was considered bona fide due to the interpretational nature of the issue. The appellant's responsibility to deliver goods inclusive of freight element supported the appellant's position. It was held that in cases of interpretation of laws, penalties are not warranted. Therefore, the penalties and interest imposed were deemed unjustified, and the appeal was allowed by setting aside the impugned order.