2015 (6) TMI 1074 - AT - Central Excise

Cenvat credit - availed cenvat credit on transport of goods by road service and utilized the same for payment of service tax attributable to the output service - credit denied on the ground that the appellant was availing credit of service tax on freight incurred for inward transportation of vehicles to be sold from the show room, which was not a taxable service - nexus between input services and output service - Held that - in view of the judgment of Hon ble Andhra Pradesh High Court in the case of Commissione Vs. Shariff Motors 2013 (12) TMI 1476 - ANDHRA PRADESH HIGH COURT , the impugned order is set aside. - Decided in favour of appellant

Summary

Issues:
1. Admissibility of cenvat credit on input services for output services.
2. Nexus between input and output services for availing cenvat credit.

Analysis:
1. The appellant, an authorized dealer of motor vehicles, availed cenvat credit on transport services for payment of service tax. The Department objected, stating the freight for inward transportation of vehicles was not a taxable service, thus no nexus existed between input and output services. The Commissioner (Appeals) upheld the objection, leading to the current appeal.

2. The appellant relied on judgments to support their position, citing the Hon'ble Andhra Pradesh High Court and a Tribunal decision. The Department argued against admissibility of cenvat credit due to the lack of nexus between input and output services, supported by a CBEC Circular and a Tribunal decision.

3. The Tribunal analyzed the nexus issue, referencing the Badrika Motors case where a proximate nexus sufficed for availing cenvat credit on transport services. It was noted that the denial of credit was based on the misconception that the sale of motor vehicles was not a taxable service. The Tribunal referred to the Shariff Motors case, emphasizing the broad definition of input services to cover both availed input services and rendered output services.

4. Given the precedent set by the Hon'ble Andhra Pradesh High Court in the Shariff Motors case, the Tribunal found no merit in the impugned order. Consequently, the order was set aside, and the appeal was allowed in favor of the appellant. The Board's Circular and the Tribunal decision cited by the Department were deemed unnecessary for further discussion, given the High Court's judgment.

This judgment clarifies the admissibility of cenvat credit on input services for output services, emphasizing the importance of a nexus between the two for credit utilization. The Tribunal's decision aligns with established legal principles and precedents, ensuring consistency in tax credit determinations.