2010 (9) TMI 336 - AT - Service Tax

Cenvat credit of service tax - goods transporting agency services used for transporting goods from the factory gate to the premises of the buyers - automotive parts supplied by the appellants are inputs and the transportation involved from factory gate of the appellants to the buyer s premises will be input services for buyers Held that - transportation involved from factory gate to the premises of the buyers will be treated as input services for the supplier of the goods in certain circumstances - appeal is liable for rejection on merit

Summary

Issues:
- Whether transportation from factory gate to buyer's premises can be treated as input services for the appellant.
- Whether the demand can be confirmed invoking the extended period of limitation.
- Whether the decision of the Larger Bench in ABB Ltd. case applies.
- Whether the conditions set by the Hon'ble High Court of Punjab & Haryana in Ambuja Cements Ltd. case are fulfilled.
- Whether the appellant is eligible for cenvat credit on outward freight involved.

Analysis:

1. Transportation as Input Services:
The dispute revolved around whether transportation from the factory gate to the buyer's premises could be considered input services for the appellant. The appellant argued that as they paid excise duty including freight and insurance, the services should be treated as input services. However, the Tribunal held that while the transportation may be considered input services for the buyers, it cannot be deemed as such for the appellant. The ownership and risk of the goods remained with the appellant until delivery to the buyers, making it inappropriate to consider the transportation as input services for both parties.

2. Extended Period of Limitation:
The appellant contested the demand by invoking the extended period of limitation. The Tribunal referred to the decision in the ABB Ltd. case, where it was held that transportation should be treated as input services. Despite the respondent's argument and the stay on the ABB Ltd. decision by the High Court of Karnataka, the Tribunal ruled in favor of the appellant, stating that the demand was time-barred as the show cause notice was issued after a significant delay.

3. Fulfillment of Conditions from Ambuja Cements Ltd. Case:
The Tribunal examined whether the conditions set by the Hon'ble High Court of Punjab & Haryana in the Ambuja Cements Ltd. case were met. While the assessable value condition was satisfied, the appellant failed to provide evidence for the other two conditions regarding ownership, risk, and integral freight charges. Consequently, the benefit of the Ambuja Cements Ltd. judgment was not extended to the appellant, leading to the rejection of the appeal on merit.

4. Eligibility for Cenvat Credit:
The appellant claimed eligibility for cenvat credit on outward freight involved, citing decisions by the Tribunal, including the Larger Bench. The Tribunal acknowledged the appellant's bona fide belief in claiming the credit. As a result, the demand was deemed time-barred, and no penalty was justified. Despite the appeal failing on merits, relief was granted to the appellant from the duty, interest, and penalty based on the limitation grounds.

In conclusion, while the Tribunal rejected the appeal on the grounds of transportation not being considered input services for the appellant, it provided relief based on the limitation aspect and the appellant's genuine belief in claiming cenvat credit.