Tribunal denies Cenvat Credit for outward transportation service tax

The Tribunal upheld the Commissioner (Appeals) decision, dismissing the appeal and confirming that the appellant is not entitled to Cenvat Credit on service tax paid for outward transportation from the factory to the dealer's premises. The Tribunal emphasized that outward transportation does not qualify as an input service under Rule 2(1) of the Cenvat Credit Rules, as it is considered an activity posterior to the clearance of goods. The appeal was therefore denied, and the original order was upheld.

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Issues Involved:
1. Admissibility of Cenvat Credit on service of outward transportation during the period from 7/2006 to 3/2007.

Detailed Analysis:

Admissibility of Cenvat Credit on Outward Transportation:
The primary issue in this case is whether Cenvat Credit is admissible on the service of outward transportation during the specified period. The appellant availed Cenvat Credit for outward transportation and charged transportation fees in the sale bill to their customer.

Appellant's Argument:
The appellant argued that the place of removal is the factory gate, and according to the amended definition of "Input Service," Cenvat Credit for services used for the removal of goods from the place of removal is admissible. They cited the judgment in ABB Vs. CCE, which was upheld by the Karnataka High Court, stating that even if freight is not included in the price of goods, it is not a prerequisite for allowing credit. The appellant contended that as per the definition of input service at the relevant time, there was no condition that the value of the service should be included in the value of goods. Hence, even though transportation charges were charged separately, Cenvat Credit should be allowed.

Respondent's Argument:
The respondent, represented by Shri Ashutosh Nath, reiterated the findings of the impugned order and cited several judgments, including:
- CCE vs. Vesuvious India Ltd.
- India Japan Lighting Private Ltd. vs. CCE
- Lafarge India Ltd. vs. CCE
- CCE vs. Lumino Industries Ltd.

Tribunal's Findings:
The Tribunal reviewed the detailed findings of the Commissioner (Appeals), which included an analysis of various judgments and the definition of "input service" under Rule 2(1) of the Cenvat Credit Rules. The Commissioner (Appeals) concluded that the appellant is not entitled to avail Cenvat Credit on service tax paid towards freight for the removal of final products from the factory to the dealer's premises. The key points highlighted were:

1. Definition of Input Service:
- Rule 2(1) defines "input service" as any service used by a manufacturer in or in relation to the manufacture of final products and clearance of final products up to the place of removal.

2. Place of Removal:
- The Tribunal referred to the case of India Japan Lighting Pvt. Ltd. vs. CCE, where it was held that outward transportation from the place of removal (factory) to the customer's premises cannot be considered an input service as it is an activity posterior to the clearance of goods.

3. Judgments Cited:
- The Tribunal cited several judgments that supported the view that outward transportation does not qualify as an input service. For instance, in CCE vs. Vesuvious India Ltd., it was clarified that transportation charges incurred for clearance of final products from the place of removal were not included in the definition of input service before or after the amendment effective from 1st April 2008.

4. Conclusion:
- The Tribunal concluded that the appellant is not entitled to Cenvat Credit on service tax paid for outward transportation from the factory to the dealer's premises. The findings of the Commissioner (Appeals) were upheld, and the appeal was dismissed.

Final Judgment:
The Tribunal upheld the order of the Commissioner (Appeals), dismissing the appeal and reinforcing the position that Cenvat Credit is not admissible on service tax paid towards outward transportation from the factory to the dealer's premises. The operative order was pronounced in court.

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