2007 (8) TMI 285 - AT - Service Tax

Respondents were availing Cenvat credit on the outward transportation charges paid by them to goods transport operators - credit denied on the ground that as per definition of input service credit of the Service Tax on GTA for outward transportation is allowed upto factory gate which is the place of removal - extending the credit beyond the point of duty paid removal of the final product, would be contrary to CCR revenue s appeal against admissibility of credit, is allowed

Summary

Issues:
- Cenvat credit on outward transportation charges
- Interpretation of "input service" under Cenvat Credit Rules, 2004

Analysis:
- The case involved a dispute regarding the denial of Cenvat credit on outward transportation charges by the Revenue. The adjudicating authority confirmed the demand, imposed penalties, and sought to recover interest from the respondent. The Ld. Commissioner (Appeals) allowed the appeal of the respondent based on the interpretation of the definition of "input service" under Rule 2(1)(ii) of the Cenvat Credit Rules, 2004. The Ld. Commissioner concluded that the transportation of goods from the factory to depot and from depots to customer places is covered by the definition of input service, allowing the appellants to take credit of service tax paid for outward transport of final products. However, the Division Bench in a previous case had ruled in favor of the Revenue, emphasizing that the credit availability is limited to 'inputs' used in or in relation to the manufacture of the final product, and extending the credit beyond the point of duty paid removal of the final product would contradict the Cenvat Credit Rules.

- The Division Bench further clarified that the interpretation of the appellant did not align with the definition of input service, which specifies that the service should be used in or in relation to the clearance of final products from the place of removal. The judgments of the Hon'ble Supreme Court highlighted that transportation (freight) is distinct from manufacturing activities and that post-sale transport of manufactured goods does not qualify as an input in manufacture. The Bench emphasized that the statute must be read as a whole, and the context of the definitions should be considered to ensure harmony and reconciliation among the provisions. Ultimately, the appeal by the Revenue was allowed, setting aside the impugned order and affirming the correctness of the order-in-original. The issue was deemed to be squarely covered against the respondent, leading to the rejection of the appeal.