By TIOL News Service

MUMBAI, NOV 25, 2014: INVENTIVENESS has been the hallmark of some in the department.

Albeit on the rarest of rare occasions this may border on absurdity!

This case perhaps falls in this legion.

The brief facts are that the appellant is procuring gas from Gas Authority of India Ltd. (GAIL) through pipelines and the same was supplied through petrol pumps or through pipelines to the consumers. The appellant is availing CENVAT credit on inputs on Inward Transportation Service and paying duty on their final product. At the end of the year, the appellant maintains a balance-sheet and account for Measurement Tolerance in their balance sheet showing shortage of gas lost during the supply as final product.

Revenue felt that they had struck gas.

Based on the aforementioned balance sheet, the department took a view that since a shortage has occurred of inputs, consequently the input service credit availed on Inward Transportation Service is reducible to the said extent.

Strange, you may say, but that's where ingenuity lies.

Proceedings were initiated & the lower authorities confirmed the demands. A princely sum of Rs.2.26 lakhs with equivalent penalty was involved in one appeal.

So, the appellant is before the CESTAT.

We reported the Stay order as 2013-TIOL-172-CESTAT-MUM.

The appeals were heard recently.

It is submitted that in this case the CENVAT credit on inputs have not been denied on account of shortages but input service credit on transportation of these inputs has been denied by the department; that it is not permissible. Moreover, the Measurement Tolerance has occurred on account of receipt of inputs and supply of finished goods and whatever shortage may occur may be during the process of manufacturing& hence CENVAT credit cannot be denied.

As is the norm, the AR supported the orders.

The Bench observed -

"6. In this case, there is no dispute on account of availment of CENVAT credit on inputs. When there is no dispute regarding receipt of inputs, therefore, whatever transportation has been paid by the appellant on Inward Transportation Service are entitled for input service credit. Further, the measurement Tolerance is on account of receipt of inputs and supply of finished goods. In these terms, it cannot be said the appellants have received the input in short quantity. Therefore, service tax on inward transportation is entitled as input service."

Holding that the appellants have rightly taken the CENVAT credit on input service on Inward Transportation Service, the orders of the lower authority were set aside and the appeals were allowed with consequential relief.

Deficiency in service - All Gas!

(See 2014-TIOL-2341-CESTAT-MUM)