2013 (12) TMI 380 - AT - Service Tax

CENVAT Credit - GTA Service - Whether the appellant is eligible for CENVAT credit of service tax paid on GTA service utilized in respect of transportation of their final product to the customers premises from the place of removal on FOR destination basis - Held that - phrase and expression activities relating to business admittedly covers transportation upto the customer s place was entirely unnecessary - when the claims are put forth on the basis of the said circular of 23-8-2007. for benefit of CENVAT credit even in the cases where the aforesaid conditions are not satisfied relying on the words clearance of final products from the place of removal the Central Government thought it fit to amend the provision from 1-4-2008 by substituting the word upto in place of from in Clause (ii) of Rule 2(l) making the intention clear i.e. whether it is an inward transportation of input of capital goods or clearance of final products upto the place of removal any service rendered and service tax paid would fall within the definition of input service . Therefore it is clear that till such amendment made effective from 1-4-2008 notwithstanding the clarification issued by the Central Government by way of their circular transportation charges incurred by the manufacturer for clearance of final products from the place of removal was included in the definition of input service - Following decision of CCE vs. ABB Ltd. 2011 (3) TMI 248 - KARNATAKA HIGH COURT - Decided against Revenue.

Summary

Issues:
- Eligibility for CENVAT credit on service tax paid for transportation of final product
- Interpretation of the phrase "activities relating to business"
- Applicability of the decision of the Hon'ble High Court of Karnataka
- Amount involved in appeals and CBEC instructions

Eligibility for CENVAT Credit:
The main issue in the appeals was whether the appellant could claim CENVAT credit for service tax paid on GTA service used for transporting their final product to customers' premises. The learned counsel argued that this issue had been settled by the Hon'ble High Court of Karnataka in a previous case involving similar circumstances. The High Court's decision highlighted the legislative intent behind the relevant rules and amendments, emphasizing that transportation charges for the clearance of final products from the place of removal were included in the definition of input service until a specific amendment in 2008. The Tribunal's interpretation of the phrase "activities relating to business" was deemed contrary to legislative intention before the 2008 amendment.

Interpretation of "Activities Relating to Business":
The interpretation of the phrase "activities relating to business" was crucial in determining the scope of CENVAT credit eligibility. The Tribunal's understanding, which included clearance of final products from the place of removal as part of input services, was challenged based on the legislative history and subsequent amendments. The decision of the Hon'ble High Court of Karnataka provided a clear framework for interpreting this phrase and highlighted the significance of the 2008 amendment in clarifying the scope of input services related to transportation charges.

Applicability of High Court Decision:
Both the learned counsel and the Commissioner (A) relied on the decision of the Hon'ble High Court of Karnataka to support the appellant's claims for CENVAT credit. The Commissioner (A) had allowed the appeals based on this precedent, indicating that the issue had already been settled by the High Court. The failure of the Revenue to consider this decision and the circular issued by the Board while filing appeals was noted, especially in cases where the amount involved was below a specified threshold set by the CBEC.

Amount Involved and CBEC Instructions:
In seven appeals, the amount in question was less than Rs. 5 lakhs, which, according to CBEC instructions, should not have led to appeals being filed by the Revenue. The failure to consider this threshold, along with the reliance on the High Court decision and the circular issued by the Board, led to the rejection of all appeals on the grounds of lacking merit. The final decision was based on the absence of legal basis for the Revenue's appeals and the established precedent from the High Court.

This comprehensive analysis of the judgment highlights the key issues surrounding the eligibility for CENVAT credit, the interpretation of relevant legal provisions, and the significance of judicial decisions in determining the outcome of the appeals.