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2016 (8) TMI 849 - AT - Service TaxCENVAT credit outward transportation of final product from factory gate to customer premises contract with customer to sell final products on FOR basis - Board circular No. 97/6/2007-ST dated 23.8.2007 Held that - in case of FOR destination sales, the ownership of the goods remain with the seller till delivery at the customer doorstep and the freight charges forming part of value of the assessable goods and borne by the assessee as sale on FOR destination basis, the outward transportation upto place of removal will be an activity covered under the definition of input service. Relaxation made by the circular issued on 23.8.2007. When the Board has made the relaxation, the assessees in entitled to take the benefit thereof CENVAT credit allowed appeal allowed decided in favor of appellant.
Issues: Whether service tax paid on outward transportation of the appellant's final product is available as cenvat credit.
The judgment by the Appellate Tribunal CESTAT NEW DELHI addressed the issue of whether the service tax paid on outward transportation of the appellant's final product is eligible for cenvat credit. The appellant sold their final product on FOR basis, where they were responsible for delivering the goods to the customer's premises, with the freight charges included in the value. The Tribunal referred to the decision in the case of ABB Limited vs. Commissioner of Central Excise & Service Tax, which held that outward transportation from the factory gate to the appellant's premises qualifies as an input service, allowing the service tax paid to be credited. This decision was upheld by the Hon'ble Karnataka High Court. The Tribunal noted that the appeals in question pertained to a period before 01.04.2008, where the definition of input service included transportation "from" the factory gate. The Commissioner (Appeals) had disallowed the credit based on a different Tribunal decision, which was later overturned by the Hon'ble Punjab & Haryana High Court, emphasizing that in FOR destination sales, the transportation up to the place of removal constitutes an input service. Additionally, the Tribunal cited favorable decisions from the Karnataka High Court and the Chhattisgarh High Court in similar cases, supporting the appellant's position. The judgment in the case of Ultratech Cement Limited vs. CCE, Raipur, and subsequent Tribunal decisions further strengthened the appellant's argument. On the contrary, the Revenue pointed out a conflicting decision from the Hon'ble High Court of Calcutta in a different case, where the Tribunal's order based on the Karnataka High Court decision was set aside. Despite this, the Tribunal highlighted that three High Court decisions supported allowing the credit for service tax on outward transportation. Considering the various legal precedents and the binding nature of Board circulars, the Tribunal concluded that the appeals should be allowed. By relying on the larger Bench decision of the Tribunal, confirmed by the Karnataka High Court, as well as the decisions from Punjab & Haryana High Court and Chhattisgarh High Court, the Tribunal set aside the impugned order and granted consequential relief to the appellants. The judgment showcased the importance of legal consistency and adherence to established precedents in determining the eligibility of cenvat credit for service tax paid on outward transportation of goods.
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