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2009 (12) TMI 213 - AT - Service TaxCenvat Credit- The assessee availed Cenvat Credit of service tax paid for outward transportation of finished goods from factory to cuspomers in respect of destination. The revenue issued a show cause notice denying the credit. The assistant commissioner confirm the denial. The Commissioner (Appeals) upheld the adjudication order on the ground that input credit was admissible in respect of outward transportation upto the place of removal and not beyond that. Held that- assessee was entitled for Cenvat Credit in respect of service tax paid for outward transportation since the freight charges formed part of the value of excisable goods and was borne by the assessee. Thus, the impugned order was to be set aside and appeal is allowed.
Issues:
1. Admissibility of Cenvat credit for outward freight. 2. Interpretation of transportation of goods to customer's premises as a business activity. 3. Applicability of CBE & C Circular No. 97/6/2007-S.T. 4. Precedents regarding Cenvat credit on GTA services for outward transportation. Analysis: Issue 1: Admissibility of Cenvat credit for outward freight The show-cause notice alleged that the appellants wrongly availed inadmissible Cenvat credit for outward freight. The appellants argued that transportation of finished products to customers' destinations is related to manufacturing activity, entitling them to claim credit for service tax paid on outward transportation. The Asstt. Commissioner denied the credit, citing the non-retrospective applicability of CBE & C Circular No. 97/6/2007-S.T. The Commissioner (Appeals) upheld the denial based on the Tribunal's decision in Gujarat Ambuja Cement v. CCE, clarifying that input credit is permissible only for transportation up to the place of removal. However, the appellant contended that transportation to customers' premises is a business activity integral to manufacturing, citing the ABB Ltd. case where the Larger Bench allowed Cenvat credit for onward transportation of finished goods. Issue 2: Interpretation of transportation of goods to customer's premises as a business activity The appellant argued that transporting goods to customer premises is a business-related activity, essential for delivering manufactured goods. They compared it to other eligible services like advertising and market research, stating that ensuring physical availability of goods to customers should also qualify for credit. The Larger Bench in the ABB Ltd. case supported this view, allowing Cenvat credit for Service Tax on onward transportation to customers' premises, considering it an input service. Issue 3: Applicability of CBE & C Circular No. 97/6/2007-S.T. The contention arose regarding the applicability of CBE & C Circular No. 97/6/2007-S.T., dated 23-8-2007, with the appellant arguing for the credit based on the business nature of transportation to customers' premises. The decision in Ambuja Cements Ltd. v. Union of India was cited, emphasizing the need to meet the conditions of the circular for availing Cenvat credit on GTA services. Issue 4: Precedents regarding Cenvat credit on GTA services for outward transportation The appellant relied on precedents like CCE v. Modern Laminators Ltd., Suja Rubber Industries (P.) Ltd. v. CCE, and Jayshree Chemicals Ltd., where it was held that Cenvat credit is available for Service Tax paid on GTA services for outward transportation. The learned SDR, however, referred to the Ambuja Cements Ltd. case, highlighting the requirement to fulfill the conditions of CBE & C Circular No. 97/6/2007-ST for claiming Cenvat credit on GTA services. In conclusion, the Tribunal, following the ABB Ltd. case, held that the appellants are entitled to Cenvat credit for Service Tax paid on outward transportation as the freight charges are part of the excisable goods' value borne by the appellants. Consequently, the impugned order was set aside, and the appeal was allowed.
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