2009 (5) TMI 241 - AT - Service Tax

Tribunal rules in favor of appellants on input service credit eligibility beyond factory gate

The Tribunal allowed the appeal, ruling in favor of the appellants regarding the eligibility of input service credit on transportation charges beyond the ... GTA service - Revenue proceeded against the appellants on the ground that they availed input service credit in respect of transport charges paid for onward transportation of goods beyond the ‘place of removal’. - Commissioner (Appeals) in the impugned order has held that in terms of Cenvat Credit Rules, the charges incurred by the appellants for transportation of finished goods beyond the factory gate are not eligible for input service credit. - Board’s Circular No. 97/8/2007 dated 23-8-2007 stating that credit on transportation admissible if sale took place at buyer’s premises - the appellants sold the goods to their buyer on F.O.R. basis. On going through the Board’s Circular, it is seen that the appellant’s case is covered by the Board’s circular. Even though the Circular is of year 2007 and period involved is prior to that, the Circular appears to be clarificatory in nature. The beneficiary Circular has to be implemented with retrospective effect – credit is admissible - we allow the appeal Issues:1. Eligibility of input service credit on transportation charges beyond the factory gate.2. Interpretation of the term 'place of removal' for availing Cenvat credit.3. Applicability of Board's Circular on input service credit eligibility retrospectively.Analysis:Issue 1:The appeal challenged the denial of input service credit by the Revenue on transportation charges paid beyond the factory gate. The appellants contended that such charges are eligible for credit as they are directly or indirectly used in the manufacture and clearance of final products. They relied on the definition of 'input service' and cited a relevant order in their favor. The Commissioner (Appeals) upheld the denial, leading to the appeal. The Tribunal considered the arguments and held that the charges for transportation of finished goods beyond the factory gate are indeed eligible for input service credit. The Tribunal noted the relevance of the additional grounds raised in the Miscellaneous Application, which was allowed, leading to the appeal's success.Issue 2:The interpretation of the term 'place of removal' was crucial in determining the eligibility of input service credit. The appellants argued that the definition of 'place of removal' under the Central Excise Act should apply to Cenvat Credit Rules. They highlighted a Board's Circular emphasizing the importance of determining the place of removal for availing service tax credit on transportation. The Circular clarified that credit would be admissible if the sale and transfer of goods occurred at the destination point. The appellants demonstrated that they cleared goods on a door delivery basis, assuming full risk and responsibility during transportation. The Tribunal, considering the Circular and the appellants' practices, allowed the appeal, stating that the Circular should be implemented retrospectively.Issue 3:The Tribunal addressed the applicability of the Board's Circular issued post-appeal filing but relevant to the case. Despite the Circular being from 2007 and the case predating it, the Tribunal deemed it clarificatory and applicable retrospectively. Citing the judgment of the Hon'ble Apex Court, the Tribunal held that the beneficial Circular should be implemented with retrospective effect. Consequently, the appeal was allowed with consequential relief, if any, based on the Circular's interpretation of input service credit eligibility.In conclusion, the Tribunal's judgment favored the appellants, allowing the appeal and providing relief based on the eligibility of input service credit on transportation charges beyond the factory gate, the interpretation of the 'place of removal' for credit availing, and the retrospective application of the Board's Circular clarifying input service credit eligibility.