2017 (1) TMI 486 - AT - Central Excise

Cenvat credit - various Input services - gta service - outward transportation up to the place of removal - Held that - The modus operandi adopted by the appellant clearly shows that the ownership / title of goods were passed on at the buyer s premises. Therefore, the service tax paid on the transportation charges should be considered as input service for the reason that outward transportation up to the place of removal is specifically appearing in the definition of input service contained in Rule 2 (l) of the Cenvat Credit Rules, 2004. With regard to the other disputed service, namely, rent-a-cab service, courier and authorized service station service, I find that those services were availed by the appellant for the manufacturing activities and the expenditure on that count have been considered in their books of accounts. Thus, those services are confirming to the definition of input service under the head activity relating to business - Appeal allowed.

Summary

Issues:
Denial of cenvat credit on input services including GTA outward service, courier service, rent-a-cab service, and authorized service station service.

Analysis:
The appellant, engaged in manufacturing automobile spare parts, faced denial of cenvat credit on various input services by the Department. The Department contended that these services lacked nexus with the final product's manufacture, rendering them ineligible for cenvat credit. The appellant's consultant argued that the GTA service, in particular, was integral to their business operations. The consultant highlighted that the freight costs incurred for delivering goods to the buyers' premises were part of the assessable value, on which central excise duty was discharged. Additionally, the consultant referenced a Tribunal decision to support the appellant's eligibility for cenvat benefit on the GTA service.

The respondent, represented by the ld. D.R., reiterated the Department's stance and relied on judgments from the Hon'ble Supreme Court and the Calcutta High Court to support their position. Upon hearing both parties and examining the records, the Tribunal noted that the buyers specifically requested delivery on an FOB basis, with insurance charges to be borne by the supplier. The Tribunal observed that the freight component was included in the assessable value, where central excise duty was paid. The Tribunal concluded that the ownership/title of goods passed to the buyers at their premises, making the service tax on transportation charges eligible for cenvat benefit.

Regarding the other disputed services, namely rent-a-cab, courier, and authorized service station services, the Tribunal found that these services were utilized for manufacturing activities, and their costs were accounted for in the books. Consequently, these services aligned with the definition of input service under "activity relating to business." Ultimately, the Tribunal found no merit in the Department's order and ruled in favor of the appellant, allowing the appeal.

In summary, the Tribunal's detailed analysis focused on establishing the nexus between the input services and the manufacturing process, particularly emphasizing the significance of the GTA service in determining cenvat credit eligibility. The judgment highlighted the importance of considering the ownership transfer of goods and the inclusion of freight costs in the assessable value. Additionally, the Tribunal clarified the eligibility of other disputed services as input services based on their relevance to the appellant's manufacturing activities.