2007 (4) TMI 18 - AT - Service Tax

Input Services Alleged that respondent is not liable for the Cenvat credit in the outward transportation and accordingly demand for refund alongwith penalty and interest Tribunal allow the appeal partly after considering the fact

Summary

Issues Involved:
1. Denial of Cenvat credit on Service Tax paid on outward transportation.
2. Imposition of penalties for availing ineligible Cenvat credit.

Issue-wise Detailed Analysis:

1. Denial of Cenvat Credit on Service Tax Paid on Outward Transportation:
The core issue revolves around whether the Service Tax paid on outward transportation qualifies as 'input service' under Rule 2(1) of the Cenvat Credit Rules, 2004. The appellant/Revenue challenged the Commissioner's (Appeals) order that allowed Cenvat credit on outward transportation, which was initially denied by the adjudicating authority. The adjudicating authority based its decision on the interpretation that 'input service' covers outward transportation only up to the place of removal, which is the factory gate in this case. The Commissioner (Appeals), however, interpreted the definition of 'input service' to include outward transportation of finished goods, arguing that if the intention was to exclude it, the definition would have explicitly stated so.

The Tribunal referred to the Division Bench's decision in M/s. Gujarat Ambuja Cements Ltd. v. CCE, Ludhiana, which clarified that 'input service' does not extend beyond the place of removal. The Tribunal held that the expression 'clearance of final products from the place of removal' means removal from the factory premises and does not include outward transportation beyond this point. Therefore, the Tribunal concluded that the Service Tax paid on transportation of finished goods from the factory to the customer's premises cannot be taken as Cenvat credit.

2. Imposition of Penalties for Availing Ineligible Cenvat Credit:
The second issue concerns the penalties imposed under Rule 15(3) of the Cenvat Credit Rules for availing ineligible Cenvat credit. The respondent argued that penalties were not justified due to the possibility of different interpretations of the rules. The Tribunal noted that in similar cases, such as J.K. Cement Works v. CCE, Jaipur, and M/s. Universal Cables Ltd. v. Commissioner of Central Excise, Bhopal, penalties were set aside despite upholding the denial of Cenvat credit. The Tribunal observed that there was no mala fide intention on the respondent's part to avail ineligible credit, and therefore, the penalties imposed by the adjudicating authority were not warranted.

Conclusion:
The Tribunal set aside the Commissioner (Appeals) order to the extent that it allowed Cenvat credit on outward transportation and restored the adjudicating authority's order denying the credit and ordering its recovery. However, the penalties imposed on the respondent were also set aside, following the precedent in similar cases. The appeals were partly allowed, confirming the denial of Cenvat credit while removing the penalties.