2008 (9) TMI 94 - AT - Service Tax

GTA service - admissibility of credit of tax paid under GTA service for outward transportation of final products - It is obvious from the Circular dated 23-8-2007 that where the excisable goods remains the property of the manufacturer and are transported on his own risk up to the premises of the buyer where the goods are delivered, the service tax incurred on freight for such transportation would be available to the manufacturer as input service credit assessee s appeal allowed

Summary

Issues:
Admissibility of service tax paid for outward transportation of final products as input service credit.

Analysis:
The case involved an application for waiver of pre-deposit and stay of recovery of an amount demanded from the appellants as inadmissible credit taken by them of the service tax paid on Goods Transport Agency Service (GTA), along with appropriate interest and penalty. The original authority found that the service tax paid on freight for outward transportation of final products was not covered by the definition of "input service." The Commissioner (Appeals) vacated the penalty but sustained the order, supported by a CBEC Circular. The appellants argued that all final products were sold on CIF basis, and they incurred freight and insurance for transportation to buyers' premises, claiming credit for service tax paid. The issue was the admissibility of service tax paid for outward transportation as input service credit. The Tribunal had previously held that goods transport service credit could not extend beyond the place of removal, which the Commissioner (Appeals) followed. The appellants sought relief based on a CBEC Circular, emphasizing the ownership transfer and risk-bearing aspects of the goods during transportation.

The definition of "input service" under the CENVAT Credit Rules, 2004 was crucial in determining the admissibility of the service tax paid for outward transportation. The CBEC Circular clarified that credit for service tax paid on transportation would be admissible if the goods remained the property of the manufacturer and were transported at his risk up to the buyer's premises. The Circular highlighted situations where the sale was deemed to occur at the destination point based on ownership, risk-bearing, and freight charges being integral to the price of goods. In such cases, the service tax paid on transportation up to the place of sale would be considered as input service credit. The Tribunal found that the credit taken by the appellants was legitimately due to them based on the clarification provided by the CBEC Circular. Consequently, the impugned order demanding the credit availed was set aside, and the appeal was allowed, with the stay application also being disposed of.

In conclusion, the judgment revolved around the interpretation of the definition of "input service" and the application of a CBEC Circular in determining the admissibility of service tax paid for outward transportation as input service credit. The Tribunal's decision was based on the clarification provided in the Circular, which established the legitimacy of the credit taken by the appellants in this case.