By TIOL Research Team

NEW DELHI, FEB 29, 2008 : RULE 2(1) of the Cenvat credit rules has been a subject matter of controversy on the eligibility of Cenvat credit on the goods transport service used for removal of goods from the place of removal. This is because the rule contained both the expressions “ from the place of removal” and ‘upto the place of removal”. This rule reads as:

(l) "input service" means any service,-

(i) used by a provider of taxable service for providing an output service; or

(ii) used by the manufacturer, whether directly or indirectly, in or in relation to the manufacture of final products and clearance of final products from the place of removal,

and includes services used in relation to setting up, modernization, renovation or repairs of a factory, premises of provider of output service or an office relating to such factory or premises, advertisement or sales promotion, market research, storage upto the place of removal, procurement of inputs, activities relating to business, such as accounting, auditing, financing, recruitment and quality control, coaching and training, computer networking, credit rating, share registry, and security, inward transportation of inputs or capital goods and outward transportation upto the place of removal.

Even the Tribunal is divided on this issue of whether credit can be allowed on the service tax paid on the outward transport from the place of removal. In India Cements case, the matter was placed before the Larger Bench because of the conflicting decisions (2007-TIOL-1248-CESTAT-BANG).

Perhaps to remove the inconsistency, this Rule has been amended vide Notification 10/2008 CE(NT) dated 1.3.2008 to replace the words “clearance of final products from the place of removal” with “clearance of final products, upto the place of removal”.