2015 (7) TMI 506 - AT - Service Tax

Denial of Cenvat credit on the transportation of levy sugar upto the place of removal and export of sugar upto the place of port of export - Transport of sugar to sister unit - Held that - Appellant is entitled to take Cenvat credit as in the case of levy sugar the place of removal is railway station and in the case of export of place of removal is load port. - Appellant is entitled to take Cenvat credit on outward transportation service in the case of transportation of levy sugar upto the railway station and transportation of export sugar upto the port. - Transportation cost has been borne by the appellant themselves. If at all they have not taken the credit on the said transportation, then their sister unit is entitled to take Cenvat credit which is the appellant themselves. In these circumstances, whatever credit has been taken by them having revenue neutral situation therefore, I hold that the appellant is not required to reverse the Cenvat credit taken on transportation of dry sugar to their sister unit. - Decided in favour of assessee.

Issues:
- Denial of input service credit on outward transportation service for the period November 2010 to July 2011.
- Interpretation of Rule 2(1) of the Cenvat Credit Rules, 2004 regarding admissibility of outward transportation charges as input service credit.
- Entitlement to Cenvat credit on transportation of levy sugar, export sugar, and transportation of dry sugar to sister unit.
- Revenue neutrality situation and its impact on Cenvat credit eligibility.

Analysis:
1. Denial of Input Service Credit: The appellant appealed against the order denying input service credit on outward transportation service. The Revenue contended that as per Rule 2(1) of the Cenvat Credit Rules, 2004, outward transportation charges are admissible as input service credit only up to the place of removal. The appellant claimed credit for transportation services beyond the place of removal, leading to the initiation of proceedings and a demand for reversal of Cenvat credit with interest.

2. Interpretation of Rule 2(1) of Cenvat Credit Rules: The key contention revolved around the interpretation of Rule 2(1) of the Cenvat Credit Rules, 2004. The appellant argued that for levy sugar and export sugar, the place of removal was the railway station and load port respectively, justifying their entitlement to Cenvat credit on outward transportation service. This argument found support in a decision of the Hon'ble Gujarat High Court cited by the appellant's counsel.

3. Entitlement to Cenvat Credit: The Tribunal analyzed the entitlement to Cenvat credit on transportation of levy sugar, export sugar, and transportation of dry sugar to the sister unit. It was held that the appellant was entitled to take Cenvat credit on outward transportation service for levy sugar up to the railway station and export sugar up to the port, aligning with a similar view taken in a previous case. Regarding transportation of dry sugar to the sister unit, since the transportation cost was borne by the appellant, they were deemed entitled to the credit, ensuring a revenue-neutral situation for the appellant and their sister unit.

4. Impact of Revenue Neutrality: The concept of revenue neutrality played a crucial role in determining the eligibility for Cenvat credit. The Tribunal emphasized that in situations where the appellant bore the transportation cost and did not claim credit, the sister unit could rightfully claim the credit, maintaining a revenue-neutral position. This consideration led to the conclusion that the appellant was not required to reverse the Cenvat credit taken on transportation of dry sugar to their sister unit.

5. Final Decision: Ultimately, the Tribunal set aside the impugned order, allowing the appeal with consequential relief, if any. The judgment highlighted the entitlement of the appellant to Cenvat credit on outward transportation service for specific scenarios, emphasizing the importance of aligning with the place of removal for determining credit eligibility.

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