Case Law Details
APAR Industries Ltd. Vs C.C.E. & S.T. (CESTAT Ahmedabad)
Introduction: In a landmark decision by the CESTAT Ahmedabad, APAR Industries Ltd. emerged victorious as the tribunal ruled that the non-inclusion of transportation costs in the assessable value does not serve as a ground for denying CENVAT Credit. This ruling addresses a long-standing ambiguity and brings clarity to manufacturers regarding the admissibility of CENVAT credit on outward transportation services.
Detailed Analysis: APAR Industries Ltd., a manufacturer of transformer oil and aluminium conductor, found itself in a legal tangle over availing CENVAT credit for the service tax paid on Goods Transport Agency (GTA) services under Reverse Charge Mechanism (RCM) for transporting goods from their factory to customers’ premises. The dispute revolved around the period from January 2005 to June 2007, with the authorities initially denying the credit based on the grounds that the sales were not on a Free On Road (FOR) basis and the sale was deemed to be at the factory gate, excluding transportation costs from the assessable value.
The crux of the matter lay in the interpretation of ‘input service’ under the CENVAT Credit Rules, which, prior to April 2008, included services used for the clearance of final products from the place of removal. The appellant’s contention, supported by judicial precedents, highlighted that the admissibility of credit on GTA services for outward transportation was well-established in the period prior to the amendment of the definition of input services in March 2008.
The tribunal, after meticulous examination, aligned with the appellant’s arguments, referencing several landmark judgments that underscored the legitimacy of availing CENVAT credit for outward transportation services. Notably, the tribunal invoked the spirit of the Larger Bench’s decision in the case of ABB Limited and the Supreme Court’s ruling in Commissioner of Central Excise, Belgaum v. M/s. Vasavadatta Cements Ltd., affirming that the non-inclusion of transportation costs in the assessable value cannot be a valid reason to deny CENVAT credit.
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