2016 (10) TMI 756 - AT - Central Excise

CENVAT credit on service tax paid on transport services - Goods Transport Agency service - outward transportation - input service - demand of duty and imposition of penalty - whether the Goods Transport Agency service fall within the definition of input service as contained in Rule 2(l) of the CENVAT Credit Rules, 2004? - Held that - the decision in the case of ABB LTD. Versus COMMISSIONER OF C. EX. & ST., BANGALORE 2009 (5) TMI 48 - CESTAT, BANGALORE relied upon where it was held that services availed by a manufacturer for outward transportation of final products from the place of removal be treated as an input service in terms of Rule 2(1)(ii) of the CENVAT Credit Rules, 2004 and thereby enabling the manufacturer to take credit of the service tax paid on the value of such services. CENVAT Credit of input service on Goods Transport Agency service allowed - appeal allowed - decided in favor of appellant.

Summary

Issues:
Interpretation of the definition of input service under Rule 2(l) of CENVAT Credit Rules, 2004 regarding Goods Transport Agency services.

Analysis:
The appeal challenged the Order-in-Appeal upholding the Order-in-Original concerning the admissibility of Cenvat Credit on Goods Transport Agency services for outward transportation. The appellant argued that the Commissioner narrowly interpreted the definition of input service, emphasizing that the place of removal was the Bhiwandi godown, not the factory gate. The appellant contended that the CENVAT Credit Rules should not be restricted by technical interpretations and cited a beneficial inclusive definition under Rule 2(l). Reference was made to a Tribunal case and a High Court judgment supporting the inclusion of outward transportation under input services.

The appellant's counsel highlighted the Tribunal's decision in ABB Ltd. and the subsequent dismissal of the revenue's appeal by the Karnataka High Court, affirming that Goods Transport Agency services qualify as input services pre-2008. The Tribunal's observation regarding transportation to customer premises as an integral business activity was emphasized. The Karnataka High Court's ruling clarified that transportation beyond the place of removal is covered under activities relating to business, supporting the appellant's claim for Cenvat Credit on outward transportation services.

In contrast, the respondent supported the lower authorities' findings, but the appellate tribunal, after considering arguments and case precedents, ruled in favor of the appellant. Citing the Karnataka High Court's judgment, the tribunal concluded that Goods Transport Agency services fall within the definition of input service, allowing the appellant's appeal and setting aside the previous order. The decision was pronounced on 19/02/2016, granting the appellant consequential relief, if any.