Transportation of Finished Goods Not an Input Service for Cenvat Credit

The Appellate Tribunal CESTAT, Chennai, held that the transportation of finished goods to the buyer's premises did not qualify as an "input service" under the Cenvat Credit Rules. The appellant's reliance on a Board circular was deemed insufficient as it was not retroactive, and the appellant failed to prove that the sale occurred at the buyer's premises. The Tribunal directed the appellant to pre-deposit the duty amount within a specified period, with compliance leading to a waiver and stay of recovery of the penalty amount. The judgment emphasizes the need to establish the location of sale and transfer of property for claiming Cenvat credit on transportation and the importance of prior decisions in resolving conflicting views within the Tribunal.

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Issues: Denial of Cenvat credit on outward transportation as input service; Applicability of circular on credit of service tax; Conflict of views on substantive issue; Reference to Larger Bench; Pre-deposit waiver request.

In this judgment by the Appellate Tribunal CESTAT, Chennai, the issue revolves around the denial of Cenvat credit on outward transportation of final products from the factory to the buyer's premises. The lower authorities had rejected the credit, stating that such transportation did not qualify as an "input service" under the Cenvat Credit Rules, 2004. The appellant relied on a Board circular from August '07, clarifying that credit of service tax on transportation to the place of sale of excisable goods would be allowed if the sale and transfer of property occurred at that place. However, the circular was not retroactive, and the appellant had to establish that the sale indeed took place at the buyer's premises to benefit from it.

Furthermore, the appellant pointed out a conflict of views on the substantive issue, leading the South Zonal Bench, Bangalore, to refer the matter to a Larger Bench. The appellant sought waiver of pre-deposit citing a stay order in a previous case. The Tribunal, after considering the submissions, noted a prior decision by a Division Bench in the India Japan Lighting case, which held that transportation of finished goods to the buyer's premises did not qualify as an "input service" under the Cenvat Credit Rules. The Tribunal indicated that if this decision had been considered earlier, there might not have been a conflicting view.

As a result, the Tribunal directed the appellant to pre-deposit the duty amount within a specified period and report compliance. The appellant's request for an extended period was denied due to the lack of financial hardship justification. Compliance with the pre-deposit would lead to a waiver and stay of recovery concerning the penalty amount. The judgment highlights the importance of establishing the location of sale and transfer of property to claim Cenvat credit on transportation and the significance of prior decisions in resolving conflicts of views within the Tribunal.

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