2017 (4) TMI 885 - AT - Central Excise

CENVAT credit - input service - outward transport of biscuits to the depot of PBPL - Held that - appellants were under obligation to transport biscuits to various depots of PBPL as such obviously the place of removal was/were depots where the appellant was required to supply manufactured biscuit as per direction of the appellant - the appellant has paid Service tax in respect of the input service i.e. the outward transportation of the biscuits to the place of removal. As such in view of Rule 3 of CCR the appellant has rightly availed Cenvat credit - appeal allowed - decided in favor of appellant.

Summary

Issues:
- Denial of Cenvat credit in respect of Service tax on outward transportation
- Interpretation of input services under Cenvat Credit Rules, 2004

Analysis:
- The appeal challenged the denial of Cenvat credit in respect of Service tax amounting to ?83,830/- on outward transportation of goods by the Commissioner of Central Excise & Customs (Appeals), Noida. The appellant, a job worker manufacturing biscuits for a principal manufacturer, claimed the Cenvat credit based on the terms of the job work agreement and authorization by the principal manufacturer.
- The department contended that since the place of removal of biscuits was the factory premises, the appellant was not entitled to Cenvat credit for Service tax on outward transport as it did not qualify as an input service under Rule 2(l) of Cenvat Credit Rules, 2004.
- The Tribunal examined the definition of input services under Rule 2(l)(ii) of Cenvat Credit Rules, 2004, which includes services used directly or indirectly in the manufacture of final products and clearance from the place of removal. The appellant had authorization from the principal manufacturer to manufacture and transport biscuits to various depots, making the outward transportation an essential part of the manufacturing process.
- The Tribunal noted that the appellant had paid Service tax on outward transportation charges to the depots of the principal manufacturer, as evidenced by Form TR-6 submissions. The terms of the job work agreement and the obligation to transport goods to various depots indicated that the place of removal was the depots, justifying the availing of Cenvat credit.
- Relying on the Karnataka High Court judgment and a Tribunal case, the appellant argued that the impugned orders disregarded the terms agreed upon with the principal manufacturer and the nature of the outward transportation as an input service. The Tribunal, after considering the contentions and evidence, concluded that the denial of Cenvat credit was unsustainable, setting aside the impugned orders and the order-in-original.

This detailed analysis of the judgment highlights the key legal issues, arguments presented, and the Tribunal's reasoning in allowing the appeal and setting aside the denial of Cenvat credit for Service tax on outward transportation.