2016 (8) TMI 1064 - AT - Central Excise

Cenvat credit - Service tax paid on outward transportation - Whether the transportation of inputs/semi-finished goods/intermediaries by the appellant assessee to their manufacturing units falls under the ambit of the definition of input service defined in Rule 2(l) of CCR, 2004 or otherwise - Held that - the decision of the Tribunal in the assessee s own case squarely covers the disputed issue. There cannot be a different view with regard to the eligibility of Cenvat credit of outward transportation is concerned. I also find from the CBEC letter cited by the appellant that in case of depot sale of goods, credit of service tax paid on the transportation of goods upto such depot would be eligible. The amount of transportation charges passed on to the receiving unit is only ₹ 4,62,597/- which is a very small fraction of the total amount in dispute and the resultant service tax demand is only ₹ 13,848/- which can be disallowed in the hands of the appellant and the credit can be availed by the respective receiving unit. The impugned order passed by lower authorities are set aside except confirming demand of ₹ 13,848/- representing service tax amount passed on by appellant to the recipient unit. - Decided partly in favour of assessee

Summary

Issues:
1. Eligibility of Cenvat credit on service tax paid on outward freight service.
2. Interpretation of Rule 2 of Cenvat Credit Rules, 2004 regarding input services.
3. Revenue neutrality in availing credit on GTA services for transfer of inputs to other units.
4. Applicability of CBEC's letter on eligibility of Cenvat credit on transportation of goods to depot sales.

Issue 1: Eligibility of Cenvat credit on service tax paid on outward freight service:
The appellant, engaged in battery manufacturing, transferred goods to other units and availed Cenvat credit on service tax paid on outward freight. The Revenue contended that the credit was ineligible as the services were used for outward transportation of goods. The Tribunal referred to a previous decision allowing such credit and a CBEC letter supporting credit eligibility for depot sales. It concluded that the appellant could avail credit for the transportation charges passed on to the receiving unit, except for a small amount of service tax, which could be disallowed. The appeal was partly allowed.

Issue 2: Interpretation of Rule 2 of Cenvat Credit Rules, 2004 regarding input services:
The appellant argued that the GTA services used for transferring inputs to other units were eligible as input services under Rule 2 of Cenvat Credit Rules, 2004. They emphasized the revenue-neutral nature of the transactions and cited relevant rules to support their position. The Revenue maintained that the services did not fall under the definition of input services. However, the Tribunal found in favor of the appellant, citing precedents and the inclusive clause of the definition, allowing credit for outward transportation of inputs.

Issue 3: Revenue neutrality in availing credit on GTA services for transfer of inputs to other units:
The appellant contended that the availed credit on GTA services for transferring inputs to other units was revenue-neutral as the cost was transferred to the receiving unit. They argued that the demand for reversal of credit should not apply as it did not impact revenue. The Tribunal agreed with the appellant, allowing credit for the transportation charges passed on to the receiving unit, thus maintaining revenue neutrality.

Issue 4: Applicability of CBEC's letter on eligibility of Cenvat credit on transportation of goods to depot sales:
The Tribunal considered a CBEC letter stating that credit of service tax paid on transportation of goods to depot sales was eligible. This was cited to support the appellant's claim that the transportation charges passed on to the receiving unit were eligible for credit. The Tribunal relied on this letter and previous decisions to conclude that the appellant could avail credit for most of the disputed amount, except for a small portion related to service tax passed on to the recipient unit.

In conclusion, the Tribunal partially allowed the appeal, permitting the appellant to avail Cenvat credit on the transportation charges passed on to the receiving unit, except for a small amount of service tax. The decision was based on the interpretation of relevant rules, precedents, and a CBEC letter supporting credit eligibility for transportation of goods to depot sales.