2016 (11) TMI 1178 - AT - Central Excise

CENVAT credit - outward transportation of spare parts - whether the denial of CENVAT credit on the ground that the services of outward transportation does not qualify as an input service in terms of Rule 2(l)(ii) of CCR, 2004 as the same is not used directly or indirectly in or in relation to the manufacture of final products, justified? - Held that - Cenvat credit on outward transportation has been rightly availed by the appellants in terms of Board s Circular No. 97/8/2007-S.T. dated 23.8.2007, once the conditions in the aforesaid Circular are satisfied, credit on outward transportation is to be allowed - reliance placed on the decision of the case of Commissioner of C.Ex., Rohtak vs. Haryana Sheet Glass Ltd. 2013 (10) TMI 1163 - PUNJAB & HARYANA HIGH COURT where it was held that in view of Circular No. 97/6/2007-ST, dated 23-8-2007, credit is admissible if ownership of goods remain with seller till delivery of goods at customer s doorstep since sales is based on basis of FOR destination , transit insurance and freight charges are borne by appellant, so credit is admissible on outward freight. CENVAT credit allowed - appeal allowed - decided in favor of appellant.

Summary

Issues:
Denial of CENVAT credit on outward transportation of goods.

Analysis:
The appeal challenged an order rejecting the appellant's appeal and upholding the Order-in-Original regarding the denial of CENVAT credit on outward transportation of goods. The appellant, engaged in manufacturing commercial vehicles and spare parts, procured spare parts from vendors paying excise duty and imported parts with CVD duty. The Department issued a notice to recover CENVAT credit of service tax on outward transportation of spare parts, contending it did not qualify as an input service for manufacturing final products. The Additional Commissioner confirmed the demand, leading to the appeal.

The appellant argued that they fulfilled conditions outlined in Circular No. 97/8/2007-S.T., allowing CENVAT credit on outward transportation. They cited various cases supporting their position and highlighted that other units of the appellant had been allowed such credit. The appellant contended that outward transportation was covered under the definition of input services, as it related to business activities. The Revenue, however, argued that outward transportation did not qualify as an input service under Rule 2(l)(iii) of the CENVAT Credit Rules, as it was used in sales activities, not manufacturing.

Upon review, the Tribunal found the issue of denial of CENVAT credit on outward transportation to be well-established in favor of the appellants based on previous judgments. Citing the precedents, the Tribunal concluded that the impugned order was unsustainable in law. Consequently, the Tribunal allowed the appeal, setting aside the impugned order and providing any consequential relief deemed necessary.