2011 (7) TMI 617 - AT - Service Tax

Input service credit on GTA service for outward transportation of the goods - Revenue denied credit on ground that charges of GTA service are not included in the assessable value of the final products as the place of removal is factory gate - Held that - Since service charges incurred in this case on GTA service has not formed part of the assessable value. The appellants are not entitled to input service credit on the said service. See CCE, Nagpur vs. Ultratech Cement Ltd (2010 (10) TMI 13 (HC)) - Decided in favor of Revenue.

Summary

Issues:
Appeal against denial of input credit on outward transportation of goods service.

Analysis:
The case involved an appeal against the denial of input credit on outward transportation of goods service. The appellants, engaged in manufacturing vehicles, were found to have availed GTA service on which they paid service tax. However, it was noted that the charges of GTA service were not included in the assessable value of the final products since the place of removal was the factory gate. Consequently, the appellants were deemed ineligible to claim input service credit under Rule 2(1) of the Cenvat Credit Rules, 2004. A show cause notice was issued proposing a demand for payment, along with interest and penalties. The notice was adjudicated, leading to the confirmation of demands, interest, and penalties by both authorities. Dissatisfied with the decision, the appellants appealed to the Tribunal.

The appellant's representative argued that their case aligned with a ruling by the Hon'ble Karnataka High Court in the matter of ABB Ltd., where it was held that input service credit for outward transportation of goods service was permissible. Conversely, the respondent's representative contended that as per the Hon'ble Bombay High Court's decision in the case of CCE, Nagpur vs. Ultratech Cement Ltd., outward transportation service charges not included in the assessable value did not entitle the appellants to claim input service credit.

Upon hearing both sides and examining the records, the Tribunal deliberated on the core issue of whether the appellants could claim input service credit on GTA service when the service charges did not contribute to the assessable value. The Tribunal referenced the conflicting decisions of the Hon'ble Karnataka High Court and the Hon'ble Bombay High Court. Ultimately, the Tribunal concurred with the view that since the service charges for GTA service did not form part of the assessable value, the appellants were not entitled to claim input service credit. Consequently, the impugned order denying the credit was upheld, and the appeal was dismissed.