2014 (9) TMI 673 - HC - Service Tax

Cenvat Credit - GTA - input services - tribunal allowed the credit on outward transportation - Held that - The Tribunal also relied on observations of the Supreme Court in All India Federation of Tax Practitioners v. Union of India - 2007 (8) TMI 1 - Supreme Court . The Supreme Court observed that Service Tax and Excise duty are consumption taxes to be borne by the consumer and therefore if credit is denied on transportation service the levy of service tax on transportation will become a tax on business rather than being a consumption tax. The Tribunal observed that the submission of the Revenue that the CENVAT credit cannot be allowed for service if the value thereof does not form part of the value subjected to excise duty runs counter to the fundamental concept of Service Tax laid down in All India Federation of Tax Practitioners case. We concur with this analysis. - Credit allowed - Decided against the revenue.

Summary

Issues involved:
- Interpretation of Rule 2(l)(ii) of the CENVAT Credit Rules, 2004 regarding the eligibility of Cenvat credit for service tax paid on outward transportation of final products.
- Whether services availed for outward transportation beyond the place of removal can be considered as "input service" for Cenvat credit.
- Application of Board Circular dated 2-2-2006 in determining eligibility for Cenvat credit.
- Comparison with the Gujarat Ambuja case and the judgment of the High Court of Punjab and Haryana.
- Consideration of OECD guidelines and the observations of the Supreme Court in All India Federation of Tax Practitioners v. Union of India.

Analysis:
The case involved appeals under Section 35G of the Central Excise Act, 1944, against a common order of the Customs, Excise and Service Tax Appellate Tribunal. The Tribunal had held that services availed for outward transportation of final products beyond the place of removal should be treated as "input service" under Rule 2(l)(ii) of the CENVAT Credit Rules, 2004, allowing the manufacturer to claim Cenvat credit for the service tax paid on such transportation. The dispute arose when the Revenue disallowed the manufacturer's claim for input tax credit on transportation of goods beyond the place of removal. The Commissioner (Appeals) had allowed the appeals based on a Board Circular, stating that credit of service tax paid on transportation of goods up to a depot would be eligible for Cenvat Credit.

The Revenue appealed to the Tribunal, questioning whether outward transportation of final products beyond the place of removal qualifies as an "input service" for Cenvat credit. The Tribunal, in line with the High Court of Punjab and Haryana's judgment in the Gujarat Ambuja case, agreed with the appellate authority's decision. It also considered the Board Circular, OECD guidelines, and the Supreme Court's observations in All India Federation of Tax Practitioners v. Union of India. The Tribunal emphasized that denying CENVAT credit for transportation services would shift the tax burden from the consumer to the business, contrary to the fundamental concept of Service Tax.

Ultimately, the Tribunal dismissed the appeals, stating that no substantial question of law arose for consideration. The judgment reaffirmed the eligibility of manufacturers to claim Cenvat credit for service tax paid on outward transportation of final products beyond the place of removal, in accordance with Rule 2(l)(ii) of the CENVAT Credit Rules, 2004.