By Puloma Dalal, Jayesh Gogri, Mandar Telang Chartered Accountants
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Whether CENVAT Credit of service tax paid on outward transportation of final goods from place of removal is allowed? Held, Yes.
Facts:
Respondent availed CENVAT Credit on input services of transportation of goods from place of removal. The adjudicating authority disallowed such CENVAT Credit, however the first Appellate authority relying on CBEC Circular F. No. 137/3/2006-CX.4, dated 02-02-2006 decided the case in favour of the respondent. Department appealed against the order and the matter was referred to the Larger Bench. The Larger Bench relying on the judgement of the Punjab & Haryana High Court in the case of Gujarat Ambuja Cement Ltd. vs. Commissioner of Central Excise, Ludhiana 2009 (14) S.T.R. 3 (P & H), CBEC Circular and the Hon’ble Supreme Court’s decision in the case of All India Federation of Tax Practitioners vs. UOI 2007 (7) STR 625 (SC), held that service tax is a destination based consumption tax to be borne by customers. The Larger Bench also held that if CENVAT Credit is denied on transportation services, it would be a tax on business rather than being a consumption tax. The argument advanced by the department that CENVAT Credit cannot be allowed for services the value of which do not form part of value under Excise Law was not accepted by the Larger Bench.
Held:
The Hon’ble High Court agreed with the analysis of the Larger Bench of Tribunal and dismissed the appeal by the department.
