2014 (7) TMI 499 - AT - Service Tax

CENVAT Credit - GTA service - transportation of finished goods - scope of input service as defined by Rule 2(l)(i) - upto the place of removal - Held that - Service tax is levied on the service recipient against transport service availed. The appellant was recipient of service of transport for transporting its finished goods and such service suffered tax - The Board Circular No. 97/8/2007-ST dated 23.08.2007 appears to have overrided the provision of Cenvat credit Rules granting credit of service tax paid on transport service availed at post manufacture stage for delivery of finished goods at the door stop of the customer. The definition of input service under Rule 2(l) of Cenvat credit Rules 2004 underwent amendment with effect from 01.04.2008 and with effect from 01.04.2011. Prior to 01.04.2011 and with effect from 01.04.2008 the said definition covered outward transportation up to the place of removal while the word from was used prior to that, in Rule 2(i) of aforesaid Rules. The appellant is different from the recipient (sister concern) of the finished goods - Prima facie, the method of accounting followed does not change the incidence of taxation. Cenvat credit being a grant of law that should be interpreted in a manner that advances object of the statute. - stay granted partly.

Summary

Issues involved: Whether Cenvat credit of Service Tax on outward freight for transportation of goods to sister units is available.

Analysis:
1. The appellant, engaged in manufacturing aerated water, claimed Cenvat credit on Service Tax paid for outward freight to transport goods to sister units and depots. The dispute revolved around the eligibility of this credit.

2. The appellant contended that it only paid freight on goods transported to sister units' depots, not on inter-sister unit transportation. It relied on Board Circulars and argued that sister units were not separate legal entities, justifying the credit claim.

3. The Revenue argued that the goods were transferred as stock to sister units, which were separate legal entities. They emphasized that the 'place of removal' cannot be equated with the sister unit's location.

4. The key issue was whether the definition of "input service" allowed Cenvat credit for post-manufacturing services like transport. The Board Circular seemed to override Cenvat credit Rules, leading to conflicting decisions from different High Courts.

5. The definition of "input service" underwent amendments, affecting the interpretation of outward transportation services. The Tribunal directed the appellant to pre-deposit a specified amount pending further proceedings.

6. The judgment balanced various legal interpretations, amendments, and precedents to decide on the Cenvat credit eligibility. It highlighted the importance of advancing the statute's objective and ensuring compliance with tax laws.