2011 (5) TMI 535 - AT - Service Tax

Cenvat credit - outward freight services - Held that - There is no dispute on the fact that the outward freight was paid in relation to removal of goods from the place of removal as the noticees are manufacturer of the goods and the output services are used by them for clearance of final product from their factory - As such find that the said credit relates to input service for the noticee and hence the same is correctly availed by them - Decided in favour of assessee.

Summary

Issues:
1. Credit of service tax paid on outward transportation.
2. Interpretation of Circular No. 97/8/2007-ST regarding conditions for claiming credit.
3. Dispute over the denial of credit by the Commissioner (Appeals).

Analysis:

Issue 1: Credit of service tax paid on outward transportation
The appeal arose from an order passed by the Commissioner (Appeals), Raipur, setting aside an order by the Deputy Commissioner, Bhilai, which had allowed credit for outward freight services related to the removal of goods from the manufacturer's factory gate. The Commissioner (Appeals) referenced a Tribunal case and disallowed the credit, leading to the appeal. The Advocate for the appellants argued that the lower authority wrongly denied the credit despite acknowledging that the outward freight was paid for the removal of goods from the factory. The Tribunal found that the credit availed by the appellants was for services up to the stage of goods removal and, as this fact was undisputed by the Department, the Commissioner (Appeals) erred in denying the credit. Consequently, the impugned order was set aside, and the credit was allowed as granted by the adjudicating authority.

Issue 2: Interpretation of Circular No. 97/8/2007-ST
The DR referenced Circular No. 97/8/2007-ST, highlighting the conditions specified under clause 8(1)(c) as prerequisites for claiming credit. However, the Tribunal's decision was based on the fact that the credit was related to input services up to the factory gate, which was not disputed by the Department. Therefore, the Tribunal concluded that the appellants were entitled to the credit despite the reference to the circular by the DR.

Issue 3: Dispute over denial of credit by the Commissioner (Appeals)
The lower authority had clearly found that the credit for outward freight services was correctly availed by the noticees as it related to the removal of goods from the factory gate, a fact not disputed by the Department. The Tribunal emphasized that since this crucial finding was not contested, the Commissioner (Appeals) had no grounds to deny the credit to the appellants. Consequently, the impugned order was deemed unsustainable, and the credit was allowed, disposing of the appeal in favor of the appellants.