CENVAT credit on outward transportation held admissible for the pre-April 2008 period under binding input service precedent.

For the period up to March 2008, outward transportation of manufactured goods was treated as an input service under Rule 2(l) of the CENVAT Credit Rules, 2004, making CENVAT credit on service tax paid for such transportation admissible. The binding High Court interpretation, affirmed by the Supreme Court, prevailed over contrary Tribunal decisions, and the first appellate authority was not entitled to ignore that precedent. The disallowance of credit for the relevant pre-April 2008 period was therefore unsustainable and the assessee was entitled to the credit.

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Issues: Whether CENVAT credit on service tax paid for outward transportation of manufactured goods was admissible for the period up to March 2008.

Analysis: For the period prior to April 2008, outward transportation of manufactured goods fell within the scope of input service under Rule 2(l) of the CENVAT Credit Rules, 2004 as settled by the binding High Court view affirmed by the Supreme Court. The first appellate authority could not disregard that binding precedent in favour of Tribunal decisions taking a different view.

Conclusion: The credit for the period up to March 2008 was admissible and the disallowance was unsustainable, in favour of the assessee.

Ratio Decidendi: A binding High Court interpretation on the scope of input service under Rule 2(l) prevails over contrary Tribunal decisions, and outward transportation credit for the relevant pre-April 2008 period is allowable.

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