2023 (11) TMI 161 - AT - Central Excise

Disallowance of CENVAT credit - procurement of outward transportation service from their factory to depots of the principals - HELD THAT - The Tribunal in MP BISCUITS (P.) LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE, ALLAHABAD 2012 (10) TMI 623 - CESTAT, NEW DELHI and in identical circumstances of another job-worker of M/s Parle Products Pvt Ltd, set aside the recovery thus holding that it is apparent that 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 Cenvat Credit Rules the appellant has rightly availed Cenvat credit. The impugned order is set aside and appeal allowed.

Summary

Issues involved: Disallowance of CENVAT credit for outward transportation service and imposition of penalty under CENVAT Credit Rules, 2004.

Summary:
1. The appeal by M/s Bunty Foods (India) Pvt Ltd challenged the disallowance of CENVAT credit amounting to Rs. 25,96,230 for the period from January 2005 to April 2007, availed on tax included in consideration for procurement of 'outward transportation service' from their factory to depots of their principals, M/s Parle Products Pvt Ltd. The Commissioner of Central Excise (Appeals) in the impugned order displaced the original authority's decision in favor of the appellant, at the behest of the jurisdictional Commissioner of Central Excise. Additionally, a penalty of a similar amount was imposed under rule 15 of CENVAT Credit Rules, 2004.

2. The appellant, undertaking 'job-work' for M/s Parle Products Pvt Ltd, availed credit under CENVAT Credit Rules, 2004 for transport of goods procured before ultimate clearance by the manufacturer, as eligible 'input service'.

3. The first appellate authority's decision was based on the ruling of the Hon'ble Karnataka High Court in a similar case, distinguishing it from other decisions presented by the appellant-Commissioner. The Tribunal, in a related case, set aside the recovery of CENVAT credit for outward transportation of goods to the place of removal, considering it as falling within the definition of input service.

4. The law has attained finality on the issue, as clarified by the High Court, regarding the definition of 'input service' and the inclusion of outward transportation of the final product up to the place of removal. The Supreme Court's decision in Commissioner of Central Excise, Belgaum v. Vasavadatta Cements Ltd further supports this interpretation.

5. Consequently, the impugned order disallowing the CENVAT credit and imposing a penalty is set aside, and the appeal is allowed.

(Order pronounced in the open court on 01/11/2023)