We are sharing with you an important judgement of the Hon’ble Supreme Court of India in the case of Commissioner of Central Excise & Service Tax Vs. Ultra Tech Cement Limited on the following issue:Issue:
Whether Goods Transport Agency (GTA) services availed for transportation of goods from the place of removal to buyer’s premises will be considered as input service within the ambit of Rule 2(l) of the Cenvat Credit Rules, 2004 (the Credit Rules)?
Facts & Background:
During the period from January, 2010 to June 2010, M/s. Ultratech Cement Limited (“the Respondent”) availed Cenvat credit of Service tax paid on outward transportation of goods through a transport agency from their premises to the customer’s premises. According to the Revenue, the transport agency service used by the Respondent for transportation of their final product from their premises to customer’s premises cannot be considered to have been used directly or indirectly in relation to clearance of goods from the factory viz., place of removal in terms of Rule 2(I) of the Credit Rules and as such cannot be considered as input service to avail Cenvat credit.
Accordingly, a show cause notice dated February 3, 2011 was issued to the Respondent alleging wrong availment of Cenvat credit of Service tax amounting to Rs. 25,66,131/- paid on outward transportation of goods from factory to customer’s premises, along with interest and penalty. Later on, the Adjudicating Authority upheld the demand holding that once the final product are cleared from the factory premises, extending the credit beyond the point of clearance of final product is not permissible under the Credit Rules.
On filing appeal before the Ld. Commissioner (Appeals), matter was decided in favour of the Respondent. The Commissioner (Appeals) allowed the appeal and held that the Respondent is eligible for availment of credit on GTA services on the outward freight from factory to customer’s premises as per the Board’s Circular 97/8/2007 dated August 23, 2007 (“the Board Circular”). Later on when the Department’s appeal at CESTAT and High Court were dismissed, the Revenue filed an appeal to the Hon’ble Supreme Court.
Observation of the Hon’ble Supreme Court:
On thread bare analysis of definition of ‘input service’ contained in Rule 2(l) of the Credit Rules, the Hon’ble Supreme Court observed as under:
