2016 (1) TMI 343 - AT - Service Tax

Appellate Tribunal rules in favor of manufacturer on cenvat credit for Courier Services

The Appellate Tribunal CESTAT AHMEDABAD ruled in favor of the appellant, a manufacturer of automotive goods, regarding the denial of cenvat credit on ... Cenvat Credit - Courier Agency services used to send finished goods eligible as Input Service or not - the words “from the place of removal” were amended to read as “Up to the place of removal” - Held that:- after 01.04.2008, though the appellant would be eligible for CENVAT credit on the Courier Service used for sending/ receiving documents related to the business, or for movement of inputs and finished goods up to the place of removal, they would not be eligible for credit on Courier Services used in relation to movement of finished goods, after the place of removal. The learned Counsel has relied upon the case law of Parle International Pvt. Limited [2012 (11) TMI 195 - CESTAT, AHMEDABAD]. On perusal of the same, it is observed that in that case the Courier Service was used for sending samples to the customers for approval and for communication with their head office to send documents and other correspondences. The Tribunal held that there is clear nexus with manufacture and hence credit is eligible. The Tribunal observed that credit can be denied only when the service has been received after the place of removal. Hence this case law is of no avail to the Appellants Courier Service used by the appellants used for the movement of finished goods after the place of removal - Credit not allowed - Decided against the assessee. Issues: Denial of cenvat credit on service tax paid on Courier Services.In this judgment by the Appellate Tribunal CESTAT AHMEDABAD, the appellant, a manufacturer of automotive goods, appealed against the denial of cenvat credit on service tax paid on Courier Services. The appellant contended that Courier Services constitute 'Input Service' and they should be eligible for the cenvat credit. The Revenue argued that post an amendment in the definition of 'Input Service' from 01.4.2008, Courier Services related to the movement of goods after the place of removal should not be considered as input services. The Tribunal analyzed Rule 2(l) of Cenvat Credit Rules, 2004 and the subsequent amendment in the definition of 'Input Service.' Prior to 01.4.2008, the definition included services used by the manufacturer in relation to the clearance of final products 'from the place of removal,' covering Courier Services for transportation of goods from the place of removal. However, post the amendment, the definition changed to 'up to the place of removal,' limiting the coverage of input services to those used till the place of removal only.The Tribunal noted that the appellant utilized Courier Services for the movement of inputs and finished goods, as well as for sending/receiving business-related documents. While they would be eligible for cenvat credit on Courier Services used up to the place of removal post the amendment, they would not be eligible for credit on services related to the movement of finished goods after the place of removal. The Tribunal distinguished a case law cited by the appellant, emphasizing that credit can be denied for services received after the place of removal. As the exact amount of service tax paid on Courier Services for the movement of finished goods post-amendment was unclear, the adjudicating authority was directed to determine this amount and restrict the demand accordingly. The impugned Order-in-Appeal was modified to reflect this direction, and the appeal was disposed of by remanding the issue to the adjudicating authority for further decision.