2009 (12) TMI 449 - AT - Service Tax

Cenvat Credit - the respondents are engaged in the manufacture of sugar confectioneries on job work basis for M/s. Parle Products Ltd. The duty is paid on clearances of confectioneries on the basis of Maximum Retail Price (MRP) after taking permissible deduction of 35 per cent. The clearances by the respondent who is the job worker is being made to the depots of Parle Products Ltd. The original authority held that the service tax paid on the services of Goods Transport Agency for transporting goods from job worker premises to the depots could not be treated as input services and Cenvat credit could not be allowed. Held that - in the light of the BoardCircular No. 137/3/2006-CX4, dated 2.2.2006, the assessee was eligible to treat goods transport utilized till removal of goods to depots of p as input service and was eligible to Cenvat Credit of service tax paid on services of goods transport agency.

Summary

Issues:
- Eligibility of Cenvat credit on service tax paid for transportation of goods by job worker to principal's depots.

Analysis:
The appeal before the Appellate Tribunal CESTAT, NEW DELHI involved a dispute regarding the eligibility of Cenvat credit on service tax paid for the transportation of goods by a job worker to the principal's depots. The case revolved around the manufacturing of sugar confectioneries by the respondents on a job work basis for a company. The duty was paid on clearances of confectioneries based on Maximum Retail Price (MRP) after a permissible deduction of 35 percent. The original authority disallowed Cenvat credit on the service tax paid for transportation of goods from the job worker's premises to the principal's depots, resulting in a demand confirmation along with interest and a penalty. However, the Commissioner (Appeals) overturned this decision and allowed the appeal by the party.

The Department, in its appeal, argued that the depots were not owned by the job worker but by the principal company, hence not constituting a place of removal. The Department also referenced a Board's instruction to support its stance. The Tribunal examined the Board's Circular dated 2-2-2006, which clarified the eligibility of credit on service tax paid for transportation of goods to depots in cases of depot sales. The Tribunal observed that the goods were manufactured by the job worker, and the ownership of the depots was not a determining factor. The Tribunal emphasized that the issue of valuation of a product and availing credit on input services were distinct matters, as per the Board's instruction, and found the rationale applicable to the present case.

Ultimately, the Tribunal upheld the Commissioner (Appeals)'s decision, ruling that the respondents were entitled to treat the Goods Transport Services utilized until the goods reached the principal's depots as input services, allowing for the extension of credit. The Tribunal found no valid grounds to interfere with the Commissioner (Appeals)'s order, leading to the rejection of the Department's appeal. Additionally, the cross-objection supporting the Commissioner (Appeals)'s order was also disposed of in favor of the party.