Appellate Tribunal Upholds CENVAT Credit for Outward Freight on Excisable Goods

The Appellate Tribunal CESTAT, Ahmedabad, upheld the decision of the Commissioner (Appeals) in favor of the assessee regarding the admissibility of cenvat credit for service tax paid on outward freight for excisable goods falling under Chapter 84 of the Central Excise Tariff Act, 1985. The Tribunal interpreted the definition of 'input service' liberally to include outward transportation up to the place of removal, rejecting the Revenue's argument that the credit was incorrect. The Tribunal's decision aligned with a legal pronouncement by the High Court of Karnataka, emphasizing that transportation charges to the place of removal are considered 'input service.'

---

---

Issues:
Admissibility of cenvat credit on service tax paid on outward freight for excisable goods under Chapter 84 of the Central Excise Tariff Act, 1985.

Analysis:
The appeal was filed by the Revenue against the order of the Commissioner (Appeals), Central Excise, Vadodara, regarding the admissibility of cenvat credit for service tax paid on outward freight by a company engaged in manufacturing excisable goods falling under Chapter 84 of the Central Excise Tariff Act, 1985. The Revenue contended that outward freight is not an input or input service for the assessee, making the cenvat credit taken incorrect and inadmissible. However, the Commissioner (Appeals) set aside the impugned order and allowed the appeal filed by the assessee, leading to the Revenue's appeal to the Appellate Tribunal CESTAT, Ahmedabad.

The crux of the issue revolved around the admissibility of cenvat credit for service tax paid on outward transportation from the factory gate, which was considered the place of removal for the assessee. The Revenue argued that the Commissioner (Appeals) erred in dropping the demand, citing a Board circular that outlined conditions under which credit of service tax paid on transportation would be admissible. The circular emphasized that if the sale and transfer of property in goods occurred at the place of delivery, credit for service tax paid on transportation to that point would be admissible.

The Tribunal referred to a legal pronouncement by the Hon'ble High Court of Karnataka in a similar case, which clarified that transportation charges up to the place of removal are included in the definition of 'input service.' The definition of 'input service' encompasses services used by the manufacturer in relation to the manufacture of final products, including the clearance of final products from the place of removal. The Tribunal interpreted the definition liberally, stating that services like transportation, loading, unloading, and delivery fall within the ambit of 'input service.' While the definition of 'input service' is restrictive in some aspects, it also includes outward transportation of final products up to the place of removal.

Ultimately, the Tribunal found no merit in the Revenue's contention and rejected the appeal, upholding the decision of the Commissioner (Appeals) in favor of the assessee. The judgment was pronounced on 15.12.2011 by P Babu, J.

---