2010 (9) TMI 865 - HC - Service Tax

CENVAT credit of service tax paid on various input services - payment of duty on final product - upto the place of removal - freight charges, incurred from depot to customer/factory to customers - revenue disallowed the said CENVAT credit on the ground that service tax paid on freight charges incurred from depot to customers/from factory to customer is not covered under the definition of input services for availing CENVAT credit - Held that - input service has to be interpreted in the light of the requirement of business and it cannot be read restrictively so as to confine only up to the factory or up to the depot of the manufacture. Service extends to the stage of handing over the goods to the customers for whom it is meant and therefore, any service tax paid upto that point, is to be taken into consideration while granting the CENVAT benefit and therefore no illegality in the impugned orders, which calls for interference - decided in favor of assessee.

Summary

Issues:
Challenge to Tribunal's order granting CENVAT credit on freight charges as input service.

Analysis:
The case involved a challenge by the revenue against the Tribunal's decision upholding the Commissioner of Central Excise (Appeals) order granting CENVAT credit to the assessee on service tax paid on freight charges. The assessee, a cement manufacturer, availed CENVAT credit on freight charges incurred from depot to customers/factory as 'input service' under the CENVAT Credit Rules, 2004. The revenue disallowed the credit, arguing that such services were not covered under the definition of 'input services'.

The Commissioner of Central Excise (Appeals) interpreted the definition of input service and held that services used for the clearance of final products from the place of removal, including goods transport services, are eligible for CENVAT credit. The Commissioner's decision was based on the broader interpretation of the definition of input service, extending it to services used in relation to the manufacture of final products and their clearance. The Tribunal, citing a previous judgment, affirmed the Commissioner's decision, emphasizing that the definition of "input service" should not be read restrictively but in line with business requirements.

The revenue contended that transportation services from the factory to the customer did not fall within the ambit of 'input service' as defined under the Rules. However, the Court upheld the Tribunal's decision, emphasizing that the interpretation of input service should consider the business needs comprehensively. The Court agreed with the Tribunal's view that services used up to the point of handing over goods to customers should be eligible for CENVAT credit. Consequently, the appeal by the revenue was rejected, affirming the Tribunal's order granting CENVAT credit on freight charges as an input service.