2018 (1) TMI 1325 - AT - Central Excise

CENVAT credit - outward transport/freight for transportation of the goods from the factory to its customers premises - denial on the ground that service tax on such transportation service was paid during the period May, 2007 to March, 2008, whereas the credit was taken in the month of August, 2014 - Held that - Since the service tax has been paid on the transportation service, the appellant should be entitled for the benefit of cenvat credit - Further, due to error in the system, the adjusting accounting entry was not made in the cenvat credit account at the time of receipt of the input service. Since such credit was taken belatedly, the benefit should not be denied to the appellant - appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Denial of cenvat credit on outward transport/freight for transportation of goods.
2. Interpretation of the definition of "input service" under Rule 2(l) of Cenvat Credit Rules, 2004.

Analysis:
1. The appellant, engaged in manufacturing wheeled tractors and other equipment, availed cenvat credit on outward transport/freight. The Department denied the credit, citing that service tax on transportation was paid earlier than the credit claim. The Tribunal noted that service tax was indeed paid for outward transportation, making the appellant eligible for cenvat credit. The delay in claiming credit due to an accounting error should not prejudice the appellant's entitlement. The Tribunal emphasized that the transportation service was received within the relevant period, aligning with the definition of "input service" at that time, which included clearance of final products from the place of removal - in this case, the factory gate. Consequently, the Tribunal found no merit in the denial of credit, ruling in favor of the appellant.

2. The crux of the issue lay in the interpretation of the definition of "input service" under Rule 2(l) of the Cenvat Credit Rules, 2004. The Tribunal highlighted that the service tax paid on transportation warranted cenvat credit, emphasizing the importance of aligning the credit claim with the service received. Despite the discrepancy in the timing of credit claim and service tax payment, the Tribunal reasoned that the appellant met the criteria for availing the credit. By analyzing the factual and legal aspects, the Tribunal concluded that the appellant's entitlement to cenvat credit was valid, as the transportation service fulfilled the conditions stipulated under the definition of "input service" prevailing during the relevant period. The judgment, therefore, rectified the denial of credit and upheld the appellant's right to claim the benefit.

This detailed analysis of the judgment addresses the issues raised, providing a comprehensive overview of the Tribunal's decision and the legal reasoning behind it.