Disallowance of Cenvat Credit of Service Tax paid on outward transportation of goods from the premises of the manufacturer to the premises of buyer.

Case Details:

Issue- In the above case, the petitioner has challenged the order passed under Section 35 – C (1) of the Custom Excise and Service Tax Appellate Tribunal, New Delhi confirming the disallowance of CENVAT Credit of Service Tax amounting to Rs.1,68,882/- paid on outward transportation of goods from the premises of the appellant manufacturer to the premises of buyer during the period from April, 2006 to March, 2011. Respondent authority disallowed credit in respect of services of outward transportation on the ground that these services have been availed beyond the factory premises and therefore, the said services are not covered under the main or the inclusive part of the input service.

Held- It was held that the original definition of ‘input service’ contained in Rule 2(l) of the Rules, 2004 used the expression ‘from the place of removal’. As per the said definition, service used by the manufacturer of clearance of final products ‘from the place of removal’ to the warehouse or customer’s place etc., was exigible for Cenvat Credit i.e. from the factory to customer’s premises, is not covered within the ambit of Rule 2(I)(i) of Rules, 2004. the post-sale transport of manufactured goods is not an input for the manufacturer/consignor. However, in the case of M/s Ultratech Cements Ltd v. CCE Bhavnagar 2007-TOIL-429-CESTAT-AHM, it was held that after the final products are cleared from the place of removal, there will be no scope of subsequent use of service to be treated as input. The above observations and views explain the scope of the relevant provisions clearly, correctly and in accordance with the legal provisions. In conclusion, a manufacturer / consignor can take credit on the service tax paid on outward transport of goods up to the place of removal and not beyond that. It is, therefore, clear that for a manufacturer /consignor, the eligibility to avail credit of the service tax paid on the transportation during removal of excisable goods would depend upon the place of removal as per the definition. Therefore, it was clear that for a manufacturer /consignor, the eligibility to avail credit of the service tax paid on the transportation during removal of excisable goods would depend upon the place of removal as per the definition.