2011 (12) TMI 404 - AT - Service Tax

Cenvat credit - outward freight - Board s circular No.97/8/2007-ST dated 23.08.07 - In the case of High Court of Karnataka in the case of CCE & Service Tax Bangalore Vs. ABB Ltd. reported in (2011 -TMI - 203985 - KARNATAKA HIGH COURT) wherein it was held that the definition of input service contains both the word means and includes but not means and includes - The portion of the definition to which the word means applies has to be construed restrictively as it is exhaustive. However the portion of the definition to which the word includes applies has to be construed liberally as it is extensive. The exhaustive portion of the definition of input service deals with service used by the manufacturer whether directly or indirectly in or in relation to the manufacture of final products - Decided in favor of the assessee

Summary

Issues:
Admissibility of cenvat credit on service tax paid on outward freight for excisable goods under Chapter 84 of the Central Excise Tariff Act, 1985.

Analysis:
The appeal was filed by the Revenue against the order of the Commissioner (Appeals), Central Excise, Vadodara, regarding the admissibility of cenvat credit for service tax paid on outward freight by a company engaged in manufacturing excisable goods falling under Chapter 84 of the Central Excise Tariff Act, 1985. The Revenue contended that outward freight is not an input or input service for the assessee, making the cenvat credit taken incorrect and inadmissible. However, the Commissioner (Appeals) set aside the impugned order and allowed the appeal filed by the assessee, leading to the Revenue's appeal to the Appellate Tribunal CESTAT, Ahmedabad.

The crux of the issue revolved around the admissibility of cenvat credit for service tax paid on outward transportation from the factory gate, which was considered the place of removal for the assessee. The Revenue argued that the Commissioner (Appeals) erred in dropping the demand, citing a Board circular that outlined conditions under which credit of service tax paid on transportation would be admissible. The circular emphasized that if the sale and transfer of property in goods occurred at the place of delivery, credit for service tax paid on transportation to that point would be admissible.

The Tribunal referred to a legal pronouncement by the Hon'ble High Court of Karnataka in a similar case, which clarified that transportation charges up to the place of removal are included in the definition of 'input service.' The definition of 'input service' encompasses services used by the manufacturer in relation to the manufacture of final products, including the clearance of final products from the place of removal. The Tribunal interpreted the definition liberally, stating that services like transportation, loading, unloading, and delivery fall within the ambit of 'input service.' While the definition of 'input service' is restrictive in some aspects, it also includes outward transportation of final products up to the place of removal.

Ultimately, the Tribunal found no merit in the Revenue's contention and rejected the appeal, upholding the decision of the Commissioner (Appeals) in favor of the assessee. The judgment was pronounced on 15.12.2011 by P Babu, J.