2017 (8) TMI 208 - AT - Central Excise

Tribunal overturns disallowance of Cenvat Credit for transportation of Telephone Sets

The Tribunal allowed the appeal, overturning the Commissioner (Appeals) order that disallowed Cenvat Credit for outward transportation of Telephone Sets. ... CENVAT credit - GTA Service - place of removal - It was alleged by the department that the service of outward transportation of GTA was rendered beyond the factory gate which is the place of removal in the appellant’s case and therefore the said outward transportation of GTA service was not the input service for the purpose of taking CENVAT Credit - Held that: - the issue of input service credit on the output transportation for the period prior to 01.04.2008 is no longer res integra and is squarely covered by the judgment of the Hon’ble Karnataka High Court in the case of CCE & ST Vs. ABB Ltd. [2011 (3) TMI 248 - KARNATAKA HIGH COURT], where it was held that Credit of service tax paid on outward transportation allowed prior to 1.4.2008 In para 7, it is mentioned that the period is 01.01.2007 to 31.07.2007, for which the appellant has produced the transit insurance policies. The insurer has certified that the two policies cover the risk of raw material as well as the finished goods removed from the appellant’s factory. Appeal allowed - decided in favor of appellant. Issues:Appeal against impugned order regarding Cenvat Credit on service tax paid for outward transportation.Analysis:The appellant, engaged in manufacturing Telephone Sets, took Cenvat Credit on Service Tax for outward transportation. Revenue alleged credit was wrongly taken as the service was beyond the factory gate, not an input service. Show cause notice issued for recovery of Rs. 4,70,491, confirmed by adjudicating authority with a penalty. Ld. Commissioner (Appeals) upheld the order. Appellant appealed citing the period as 01.01.2007 to 31.07.2007. Ld. Advocate referenced judgments to support the appeal.The key issue was whether Cenvat Credit for outward transportation was admissible. The judgment cited the decision of Hon’ble Karnataka High Court, emphasizing the interpretation of “activities relating to business” and the legislative intention behind the definition of input service. The Court clarified that transportation charges for clearance of final products from the place of removal were included in the definition of input service until an amendment effective from 1-4-2008. The Tribunal had previously followed this interpretation in various cases.The Tribunal found the Commissioner (Appeals) erred in analyzing the documents based on the wrong violation period and set aside the order. The appellant produced transit insurance policies covering raw materials and finished goods removed from the factory for the period in question. Consequently, the Tribunal allowed the appeal, declaring the Commissioner (Appeals) order unsustainable.