2018 (9) TMI 1122 - AT - Central Excise

CENVAT Credit - input services - courier services for sending the samples of their products to buyers in foreign countries - Department was of the view that these are export of goods as the courier services is akin to outward transportation of finished goods from factory gate to the customer s premises and therefore is not eligible for credit. Held that - The samples have been sent free of cost to the prospective buyers. It cannot be said to be removal of finished goods, which involves sale of excisable goods. It is more akin to sales promotion or marketing or advertisement of the product which has been sent to the prospective foreign buyer. The same would fall within the inclusive part of the definition - credit allowed - appeal allowed - decided in favor of appellant.

Summary

Issues:
- Eligibility of Cenvat credit on service tax paid on courier services for sending product samples to foreign buyers.

Analysis:

1. Issue of Cenvat Credit Eligibility:
- The appellants, manufacturers of specific products, availed Cenvat credit on service tax paid for courier services used to send product samples to foreign buyers.
- The department contended that these services were akin to outward transportation of finished goods and thus not eligible for credit.
- Show Cause Notice was issued for multiple periods, and the demand, interest, and penalties were confirmed by the original authority and Commissioner (Appeals).

2. Appellant's Argument:
- The appellant's counsel argued that sending free samples to foreign buyers was a marketing strategy to obtain purchase orders, not a removal of finished goods.
- The counsel emphasized that the samples were sent free of cost for promotional purposes, falling within the marketing/advertisement scope rather than transportation of goods.

3. Respondent's Position:
- The respondent supported the original findings, stating that sending finished products to foreign buyers for free constituted outward transportation, making the courier services ineligible for credit.

4. Judgment and Analysis:
- The tribunal acknowledged the appellant's stance that sending samples was a promotional activity, not a sale or removal of goods.
- It was deemed that sending free samples for marketing purposes did not constitute removal of excisable goods, aligning with sales promotion or advertisement activities.
- Consequently, the denial of credit based on considering the services as outward transportation was deemed erroneous and unjustified.
- The tribunal set aside the impugned orders, allowing the appeals and any consequential reliefs.

5. Conclusion:
- The judgment, delivered on 18.7.2018, clarified that sending product samples to foreign buyers for marketing purposes qualifies for Cenvat credit on service tax paid for courier services, overturning the previous decisions and providing relief to the appellants.