2016 (5) TMI 1125 - AT - Service Tax

Eligibility of Cenvat credit of service tax - outward freight charges involved for clearance of finished products from the factory and up to the delivery effected at the customer s end/premises as per contractual terms agreed upon between the parties - Non-compliance of CBEC Circular dated 23.08.2007 but no evidence for the same - period involved from January 2005 to November 2007 and December 2007 to November 2008 - Held that - in view of the decision of Karnataka High Court in the case of CCE Vs. ABB Ltd. 2011 (3) TMI 248 - KARNATAKA HIGH COURT which is an uphelded decision of Larger Bench of the CESTAT reported in 2009 (5) TMI 48 - CESTAT BANGALORE it has been clearly upheld that the service tax paid on GTA services utilized for outward transportation of final product is allowable for the period prior to 01.04.2008 as per the definition of input services as contained in Rule 2(l) of the Cenvat Credit Rules and this appeal pertains to the period prior to 01.04.2008 only and the period after 01.04.2008 the appellant himself has reversed the credit of cenvat on GTA. Therefore the impugned order is not sustainable. - Decided in favour of appellant

Summary

Issues:
- Entitlement to cenvat credit on outward freight charges for transportation of final products
- Compliance with CBEC Circular dated 23.08.2007
- Applicability of Rule 2(l) of the Cenvat Credit Rules
- Interpretation of relevant case laws

Entitlement to Cenvat Credit on Outward Freight Charges:
The appellant, engaged in manufacturing capsules, availed cenvat credit on outward freight charges for transporting finished products. The authorities denied the credit, stating non-compliance with CBEC Circular dated 23.08.2007. The appellant argued that pre-01.04.2008, cenvat credit for service tax on GTA services used for outward transportation was allowable. The appellant supported this argument with various case laws, emphasizing eligibility of such credit. The appellate tribunal noted that for the period before 01.04.2008, the appellant had reversed the cenvat credit amount for GTA services post-01.04.2008. Citing relevant case laws, the tribunal held in favor of the appellant, allowing the appeal and setting aside the impugned order.

Compliance with CBEC Circular and Rule 2(l) of Cenvat Credit Rules:
The dispute centered around compliance with the CBEC Circular dated 23.08.2007 and Rule 2(l) of the Cenvat Credit Rules. The appellant contended that the circular's requirements were fulfilled, as evidenced by bearing and paying outward freight charges for door delivery consignments. The tribunal observed that the appellant's actions aligned with the circular's stipulations. The appellate tribunal's decision emphasized the importance of adherence to circular provisions and relevant rules, ultimately supporting the appellant's position based on the presented facts.

Interpretation of Relevant Case Laws:
The tribunal extensively analyzed various case laws cited by the appellant to support their claim for cenvat credit on outward freight charges. Notably, the tribunal referenced the decision in CCE Vs. ABB Ltd., where the High Court upheld the allowance of service tax on GTA services for outward transportation pre-01.04.2008. By referencing legal precedents, the tribunal reinforced the appellant's argument regarding the eligibility of cenvat credit for the specified period. The tribunal's reliance on established case laws played a crucial role in the final decision to set aside the impugned order and rule in favor of the appellant.