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.
Conclusion: The CESTAT Ahmedabad’s ruling in favor of APAR Industries Ltd. marks a significant precedent, reinforcing the rights of manufacturers to avail CENVAT credit for outward transportation services. This decision not only resolves a longstanding point of contention but also promotes a clearer understanding of the CENVAT Credit Rules prior to their amendment in 2008. Manufacturers can now breathe a sigh of relief, knowing that the costs of transportation, whether included in the assessable value or not, do not impact their eligibility for CENVAT credit on outward transportation services. This judgment is a step towards simplifying the tax framework and ensuring fairness in the application of tax laws.
FULL TEXT OF THE CESTAT AHMEDABAD ORDER
The brief facts of the case are that the Appellant is manufacturer of transformer oil, aluminium conductor falling under chapter heading 27 and 76 of the First Schedule to the Central Excise Tariff Act, 1985. The Appellant availed outward transportation service from GTA to transport the goods from the factory to customer’s premises and discharged service tax under RCM on the said GTA services. The Appellant availed the credit of the said service tax paid under RCM. However, due to prevailing ambiguity regarding the admissibility of the credit the Appellant reversed the said credit under protest.
1.1 The Appellant was issued a show cause notice dated 02.12.2009 demanding the wrongly availed CENVAT credit of service tax paid on GTA services under RCM for the period January 2005 to June 2007. The said demand of the wrongly availed CENVAT credit was confirmed by the adjudicating authority, which was upheld by the Commissioner (Appeals). This Tribunal, vide its Order dated 06.01.2020, remanded the proceedings to the adjudicating authority for fresh adjudication. The remand proceedings were also concluded by denying and confirming the demand of the said credit by both the lower authorities. The present appeal is against the Order of the Commissioner (Appeals) rejecting the Appellant’s appeal against the demand of the wrongly availed credit.
2. Shri Prakash Shah along with Shri Mohit Raval, Advocates for the Appellant submit that the Appellant availed the GTA services for outward transportation of the final products on which the service tax is paid under RCM by the Appellant and since the said services are availed for transporting goods from the factory to the customer’s premise, the said service qualify as ‘input service’ and CENVAT credit of same is admissible to the Appellant. The issue of admissibility of the credit on GTA service for outward transportation is no longer res-integra as the Hon’ble Supreme Court, Hon’ble High Courts and this Tribunal in various judgments allowed the CENVAT of service tax paid on the outward transportation services prior to the amendment of the definition of input services under Rule 2(l) of CCR in March 2008. He placed reliance on the following judgments: –
