CENVAT credit for clearing and forwarding services upheld where depot was treated as the place of removal.

CENVAT credit on clearing and forwarding related service tax was allowed where the expenditure related to movement beyond the factory gate but formed part of the assessable value up to the depot treated as the place of removal. Rule 2(1) of the CENVAT Credit Rules, 2004 was read in light of the scheme's object of preventing cascading taxation and preserving tax neutrality, with services used directly or indirectly in relation to manufacture, clearance from the place of removal, and business activities treated as separate limbs of entitlement. On these facts, the credit could not be denied merely because the service related to post-manufacture clearance.

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Issues: Whether service tax paid on clearing and forwarding related expenditure incurred beyond the factory gate, but forming part of the assessable value up to the depot treated as the place of removal, is eligible for CENVAT credit under the definition of input service.

Analysis: The definition of input service in rule 2(1) of the CENVAT Credit Rules, 2004 was read in the context of the CENVAT scheme's object of avoiding cascading taxation and maintaining tax neutrality. Services used directly or indirectly in relation to manufacture, clearance of final products from the place of removal, and activities relating to business were treated as independent limbs of entitlement. Since the depot was treated as the place of removal on the facts, and the expenditure formed part of the value on which excise duty was paid, the service tax component could not be denied merely because the service related to post-manufacture clearance.

Conclusion: The assessee was entitled to CENVAT credit on the disputed clearing and forwarding related service tax, and the denial was unsustainable.

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