2012 (10) TMI 623 - AT - Central Excise

Cenvat credit on GTA services - manufacture of biscuits on job work basis Held that - Appellants claimed and avail cenvat credit in respect of service tax paid by them on outward transportation of the goods from their factory to the depot/ premises of principal - appellant has paid service tax in respect of the input service i.e. the outward transportation of the biscuits to the place of removal. As such, in view of Rule 3 of Cenvat Credit Rules the appellant has rightly availed cenvat credit - orders denying cenvat credit to the appellant is not sustainable.

Summary

Issues:
- Denial of cenvat credit in respect of service tax on outward transportation of goods
- Interpretation of input services under Cenvat Credit Rules, 2004

Analysis:
1. The appeal challenged the order denying cenvat credit for service tax amounting to Rs. 6,44,299/- on outward transportation of goods. The appellant, a job worker for a principal manufacturer, claimed the credit based on an agreement and authorization from the principal manufacturer.

2. The appellant contended that outward transportation of manufactured goods falls within the definition of input service as per Cenvat Credit Rules, 2004. The department argued that since the place of removal was the factory premises, cenvat credit was not applicable to outward transportation.

3. The Tribunal examined the terms of the agreement between the appellant and the principal manufacturer, which authorized the appellant to manufacture and transport goods to various depots. The Tribunal noted that the appellant paid transportation charges and service tax on outward transportation, which was considered an input service under Rule 3 of Cenvat Credit Rules.

4. Rule 3(xi)(ii) of Cenvat Credit Rules, 2004 allows a manufacturer to take cenvat credit of input services used in the manufacture and clearance of final products. The definition of input service includes services used directly or indirectly in the manufacture and clearance of final products.

5. The Tribunal found that the appellant's transportation of goods to the depots of the principal manufacturer constituted an input service as per the agreement and the nature of the job work. The appellant had paid service tax on the transportation charges, making them eligible for cenvat credit.

6. Consequently, the Tribunal held that the denial of cenvat credit was not sustainable. The appeal was accepted, and both the impugned order and the order-in-original were set aside, allowing the appellant to avail the cenvat credit for the service tax paid on outward transportation of goods.