2015 (10) TMI 54 - AT - Service Tax

Denial of CENVAT Credit - Held that - As delivery charges are included in selling price, relying on Karnataka High Court judgment in case of Commr of C.Ex & ST vs. ABB Ltd. 2011 (3) TMI 248 - KARNATAKA HIGH COURT wherein, the full bench of CESTAT held that the expression activities relating to business admittedly covers transportation upto the customers place and therefore, credit cannot be denied. The expression such as is purely illustrative. The expression means for example or of a kind that . The usage of the words such as after the expression activities relating to business in the inclusive part of the definition, therefore, further support the view that the definition of the term input services would not be restricted to services specified thereafter. It is also noted that the transportation of goods to customer s premise is an activity relating to business. It is an integral part of business of manufacturer, to transport and deliver the goods manufactured. Even services like advertising, market and research, which are undertaken to attract customers to buy goods of manufacturer are eligible to credit. - Decided in favour of assessee.

Summary

Issues:
- Admissibility of CENVAT Credit on services provided by a courier company for outward movement of goods cleared for export
- Interpretation of the definition of "input services" under CENVAT Credit Rules, 2004
- Applicability of CBEC circular dated 23.08.2007 on CENVAT Credit eligibility for post-clearance export activities

Analysis:

1. Admissibility of CENVAT Credit on Courier Services:
The appellant, engaged in manufacturing M.V. Parts, availed CENVAT Credit on services provided by a courier company for outward movement of goods cleared for export. The department contended that the services were not covered under the definition of "input services" as per CENVAT Credit Rules, 2004. The Assistant Commissioner disallowed the credit, leading to an appeal. The Commissioner (Appeals) upheld the decision, stating that the services were not connected with the manufacture of goods and were post-clearance export activities. However, the appellant argued that as the services were related to sales activities and transportation up to the customer's place, credit should be allowed. The Tribunal, considering Karnataka High Court judgment, held that transportation to the customer's place is an activity relating to business and integral for manufacturers. Therefore, the appeal was allowed with consequential benefits.

2. Interpretation of "Input Services" Definition:
The dispute revolved around the interpretation of the term "input services" under CENVAT Credit Rules, 2004. The appellant contended that the courier services were essential for their business, especially for sales-related activities, and should be considered as input services. The department, however, argued that the services did not fall within the definition of input services and were not eligible for credit. The Tribunal, relying on precedents and the inclusive nature of the term "activities relating to business," concluded that transportation up to the customer's place is an integral part of business activities, making it eligible for credit. This interpretation favored the appellant's claim for CENVAT Credit on the courier services.

3. Applicability of CBEC Circular on CENVAT Credit Eligibility:
The appellant also raised the issue of the applicability of the CBEC circular dated 23.08.2007 concerning CENVAT Credit eligibility for post-clearance export activities. While the circular primarily addressed GTA services, the appellant argued that a similar interpretation could be applied to other services, including the courier services in question. The Tribunal did not specifically address the circular but based its decision on the broader definition of "input services" and the relevance of activities related to business. Consequently, the Tribunal allowed the appeal, emphasizing the importance of transportation to the customer's premises and the eligibility of such services for CENVAT Credit.

This detailed analysis highlights the key arguments, legal interpretations, and the Tribunal's decision regarding the admissibility of CENVAT Credit on courier services, the definition of "input services," and the applicability of relevant circulars in the context of the case.