Availability of Cenvat Credit of Service Tax paid on Transportation - PART - II "  

Whether the services in relation of Outward Transportation of Finished Goods from the factory is to be considered as in relation to "Clearance of final products from the place of removal" for the purpose of Cenvat Credit in terms of Rule 2(l) of Cenvat Credit Rules, 2004. 

There was a wide understanding that, the term "clearance of final products from the place of removal" includes the services in relation to transport of final products (finished goods) from place of removal. 

But, the department has taken a different view and rejected the claim of Cenvat Credit of the manufacturer for availing Cenvat Credit against Service Tax paid on outward transportation. 

In NHK SPRING INDIA LTD.  reported in 2006 -TMI - 752 - COMMISSIONER OF C.E. (APPEALS) [Central Excise Section] Commissioner (Appeals) has held that, the Service Tax paid on transportation of finished goods from the factory to the premises of the customer can be taken as Cenvat Credit by the Appellants. 

But, the Delhi Bench of Honorable Tribunal (CESTAT) has taken a contrary view in the matter of  M/s GUJARAT AMBUJA CEMENTS LTD. Versus COMMISSIONER OF C. EX., LUDHIANA reported in 2007 -TMI - 1132 - CESTAT,NEW DELHI [Central Excise Section].  In this case, it was held that Cenvat Credit of Service tax paid on outward transportation beyond the place of removal is not available. Further it was held that,  the words "clearance of final products from the place of removal" as per rule 2(l) of the Cenvat Credit Rules, 2004 does not include the activity of "transportation from the place of removal". 

However, the decision of Commissioner (Appeals) in the matter of M/s NHK SPRING INDIA LTD got vetted by the honorable tribunal (CESTAT) Ahemdabad bench while granting Stay in the matter of M/s GUJARAT SIDHEE CEMENT LTD. Versus CCE, BHAVNAGAR reported in 2007 -TMI - 1134 - CESTAT- Ahbad. [Central Excise Section] While Granting Stay, honorable tribunal has observed that, "on a careful study of the definition of the term input service, I find that as rightly pointed out by the Appellants it is an inclusive definition to cover transport of goods from the factory to the depot as well as transportation of inputs. Their argument that outward transportation of finished goods manufactured by them would fall within the definition of "inputs service" appears to be correct and therefore the credit availed by them cannot be denied. If the intention was to deny credit in respect of outward transportation of finished goods then the same could have been specifically excluded in the definition itself, which however, has not been done."

Cenvat credit for outward transportation: whether transport of finished goods qualifies as clearance under Cenvat rules affects credit availability. The availability of Cenvat credit for Service Tax on outward transportation of finished goods hinges on whether such transport falls within 'clearance of final products from the place of removal' under Rule 2(l) of the Cenvat Credit Rules, 2004. Tribunal and appellate decisions conflict: NHK Spring India Ltd. allowed credit for transportation from factory to customer, Delhi CESTAT in Gujarat Ambuja denied credit for transport beyond place of removal, while Ahmedabad CESTAT observed the inclusive input service definition could cover outward transportation.