2012 (6) TMI 305 - AT - Central Excise

Bifurcation of Freight paid in respect of domestic clearances and export clearances for CENVAT credit - Held that - Outward transport service used by the manufacturers for transportation of finished goods from the place of removal upto the premises of the purchaser is covered within the definition of input service provided in Rule 2(1) of the CRR - it makes no difference for allowing Cenvat credit whether the goods are cleared for export purpose or for domestic purpose up to the place of removal - against revenue.

Summary

Issues:
- Interpretation of Cenvat credit rules regarding service tax paid on freight for domestic and export clearances.
- Application of judgment of Hon'ble High Court of Gujarat in CCE & C vs. Parth Poly Wooven Pvt. Ltd.
- Bifurcation of freight paid for domestic and export clearances.

Analysis:
The judgment by the Appellate Tribunal CESTAT, New Delhi, addressed the issue of Cenvat credit eligibility for service tax paid on freight for both domestic and export clearances. The learned Counsel referred to the judgment of the Hon'ble High Court of Gujarat in the case of CCE & C vs. Parth Poly Wooven Pvt. Ltd., emphasizing the conclusion reached by the appellate authority in light of this judgment. The representative for Revenue argued for the bifurcation of freight paid for domestic and export clearances.

The Tribunal highlighted paragraphs 21 and 22 of the Hon'ble High Court of Gujarat's judgment, which discussed the interpretation of the definition of outward transportation up to the place of removal. The Court's analysis included scenarios where manufacturers transport finished products from the factory to other locations, such as warehouses, and concluded that such transportation up to the purchaser's premises qualifies as an input service under the Cenvat Credit Rules, 2004.

The Tribunal ruled that the payment of service tax on freight, regardless of whether the goods are cleared for export or domestic purposes up to the place of removal, entitles the taxpayer to Cenvat credit. The judgment emphasized that the outward transport service used by manufacturers for transporting goods up to the purchaser's premises falls within the definition of input service, allowing for the enjoyment of Cenvat credit. Consequently, the Revenue's appeal was dismissed, affirming the eligibility of Cenvat credit for service tax paid on freight for both domestic and export clearances.