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2022 (5) TMI 904 - AT - Central ExciseCENVAT Credit - input services - freight charges for the outward transportation of finished products upto the buyers premises as well as the dealers - place of removal - HELD THAT - From the definition of input service, it can be seen that prior to 1.4.2008, in sub-clause (ii) any service used by the manufacturer whether directly or indirectly, in or in relation to the manufacture of final products and clearance of final products from the place of removal, will fall within the definition of input service - After 1.4.2008, the definition has been amended so that any service used for clearance of final products upto the place of removal will fall within the definition of input service. The department has taken a view that outward transportation of the goods is a post-sale expenditure and thus is an activity after manufacture. That therefore the credit in relation to the outward transportation of finished products upto the buyers premises / dealer s premises is not eligible. In all these appeals the period of dispute is prior to 1.4.2008. The Hon'ble Supreme Court in the case of COMMISSIONER OF CENTRAL EXCISE, BELGAUM VERSUS M/S. VASAVADATTA CEMENTS LTD. 2018 (3) TMI 993 - SUPREME COURT had considered the very same issue and held that the expression used in the definition is from the place of removal . It has to be from the place of removal upto a certain point. Therefore, tax paid on the transportation of the final products from the place of removal upto the that point whether it is depot or the customers premises has to be allowed. It was further held that the amendment carried out in the definition with effect from 1.4.2008 substituted the words from the place of removal with upto the place of removal . Thus, from 1.4.2008, CENVAT credit would be available upto the place of removal. The credit on outward transportation from the place of removal upto the buyers premises / dealers for period upto 31.03.2008 is eligible - Appeal allowed - decided in favor of appellant.
Issues Involved:
1. Eligibility of CENVAT credit on service tax paid for outward transportation of finished products to buyers' premises. 2. Interpretation of "input service" definition before and after 1.4.2008. 3. Applicability of Supreme Court judgments on the issue. Issue-wise Detailed Analysis: 1. Eligibility of CENVAT Credit on Outward Transportation: The primary issue revolves around whether the appellants can avail CENVAT credit on the service tax paid for the transportation of finished products to the buyers' premises. The department contended that such credit is not eligible as outward transportation beyond the place of removal is a post-sale activity. However, the Tribunal had previously allowed the credit based on the Karnataka High Court’s decision in ABB Ltd. The High Court remanded the matter to reassess the applicability of Supreme Court judgments in Vasavadatta Cements Ltd. and Andhra Sugars Ltd. 2. Interpretation of "Input Service" Definition: The definition of "input service" before and after 1.4.2008 is crucial to this case. Before 1.4.2008, the definition included services used in or in relation to the manufacture and clearance of final products from the place of removal. Post 1.4.2008, the definition was amended to restrict input services to those used up to the place of removal. The department argued that outward transportation to the buyers' premises does not qualify under the amended definition. 3. Applicability of Supreme Court Judgments: The Supreme Court in Vasavadatta Cements Ltd. clarified that CENVAT credit is available for transportation from the place of removal to the customer's premises before 1.4.2008. The Court emphasized that the definition change post 1.4.2008, which limits credit to transportation up to the place of removal, does not apply retroactively. Similarly, in Andhra Sugars Ltd., the Court upheld that services used for transportation from the place of removal are eligible for credit under the pre-1.4.2008 definition. Tribunal’s Analysis: The Tribunal analyzed the Supreme Court judgments and noted that the phrase "from the place of removal" implies that transportation services used from the place of removal to the customer’s premises are eligible for credit before 1.4.2008. It was also observed that the amendment effective from 1.4.2008, which substituted "from the place of removal" with "up to the place of removal," does not affect the eligibility of credit for periods before the amendment. Conclusion: The Tribunal concluded that the appellants are eligible for CENVAT credit on outward transportation from the place of removal to the buyers' premises for the period before 1.4.2008. The Supreme Court’s decisions in Vasavadatta Cements Ltd. and Andhra Sugars Ltd. support this conclusion. Consequently, the impugned orders were set aside, and the appeals were allowed with consequential relief. Final Order: The Tribunal pronounced that the credit on outward transportation from the place of removal to the buyers' premises for the period up to 31.03.2008 is eligible. The appeals were allowed, and the impugned orders were set aside. The decision was pronounced in open court on 18.5.2022.
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