CENVAT credit on outward transport of bagasse was held admissible for the pre-1.4.2008 period, defeating demand and penalty.

For the period before 1.4.2008, goods transport agency service used for outward transportation of bagasse was treated as an input service for CENVAT credit purposes. On that legal position, service tax credit on the outward transportation of the sugar by-product was admissible, so the associated demand for service tax and interest could not be sustained. The connected penalty also failed, as it depended on the same inadmissibility finding. The issue was decided in favour of the assessee, with credit held allowable for the relevant period.

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Issues: Whether service tax paid on goods transport agency service used for outward transportation of bagasse for the period prior to 1.4.2008 was eligible for CENVAT credit as input service, and whether the demand and penalty could be sustained.

Analysis: The dispute related to credit taken on service tax paid for transportation of bagasse, a by-product of sugar manufacture. The parties agreed that for the period prior to 1.4.2008, goods transport agency service used for outward transportation of the assessee's final products had to be treated as input service in the light of the binding legal position applicable to that period. In view of that position, the demand of service tax, interest and the connected penalty could not survive.

Conclusion: The issue was decided in favour of the assessee. The credit was held admissible for the relevant period, and the demand and penalty were not sustainable.

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