2016 (8) TMI 352 - AT - Service Tax

Cenvat credit - Allowability - Outward transportation - Appellant discharged service tax liability under GTA services - Held that - the outward transportation of finished goods manufactured by the appellant would fall within the definition of input service and therefore credit availed by them cannot be denied. If the intention was to deny the credit in respect of outward transportation of finished goods then the same could have been specifically excluded in the definition itself, which however has not been done. Further, if the intention was to deny the credit in respect of outward transportation then there was no need to include the words clearance of the final products from the place of removal in rule 2(l) of the rules relating to the definition of input services. Therefore, by considering the definition of input service in the Cenvat Credit Rules and the decisions of the higher judicial fora the service tax paid on transportation of finished goods from the factory to the premises of the customers can be taken as CENVAT Credit by the appellant and therefore, the denial of the same is not legal and proper. - Decided in favour of appellant

Summary

Issues: Denial of CENVAT credit on outward transportation

Analysis:
The appeal was against the Commissioner's order denying CENVAT credit on outward transportation amounting to ?11,72,269 for the period April 2005 to October 2005. The appellants, engaged in manufacturing pig iron and steel products, had their service tax liability for freight under goods transport agency services. The department found them ineligible for the credit during an audit, leading to a show-cause notice and subsequent order by the Commissioner limiting the demand. The appellant contended that the denial was illegal, citing Rule 2(l) of CENVAT Credit Rules allowing credit for service tax on input services related to manufacturing and clearance of finished goods. They argued that outward transportation qualifies as an input service, supported by various judgments. The appellant emphasized that the transportation of goods to customers' premises falls under the definition of input service, as per the CENVAT Credit Rules.

Judgments Cited:
The appellant relied on several judgments, including Madras Cements Ltd Vs ACCE, Ambuja Cements Ltd Vs UOI, and Lafarge India Ltd Vs CCE Raipur, to support their claim for CENVAT credit on outward transportation. They also highlighted the decision of the Hon'ble High Court of Karnataka in CCE, ST-LTU Vs ABB Ltd, which affirmed the entitlement to such credit.

Decision:
After considering both parties' arguments and the judgments cited, the Tribunal concluded that outward transportation of finished goods qualifies as an input service under the CENVAT Credit Rules. The Tribunal noted that if the intention was to exclude credit for outward transportation, it would have been specified in the definition of input service. Given the inclusive definition and the absence of specific exclusion for outward transportation, the Tribunal held that the denial of CENVAT credit on transportation in the Commissioner's order was not legally sound. Consequently, the Tribunal set aside the impugned order, allowing the appeal of the appellant and directing for any consequential relief.

Conclusion:
The Tribunal's decision favored the appellant, establishing that the service tax paid on transportation of finished goods to customers' premises can be claimed as CENVAT Credit. The judgment emphasized the importance of interpreting the definition of input service under the CENVAT Credit Rules and considered the precedents cited by the appellant to support their entitlement to the credit on outward transportation.