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CENVAT Credit of Service Tax paid on transportation of goods to sister unit - Credit is admissible at sender's end: CESTAT

By TIOL News Service

CHENNAI, JUNE 02, 2016: THE dispute in this appeal is whether service tax paid for transporting the goods cleared by the appellant to its sister unit shall entitle it to the CENVAT credit of such tax paid.

According to the revenue, credit ought to have been taken by the sister unit instead of the appellant unit. The reverse is the argument of the appellant.

The Tribunal held:

+ when liability is incurred by the appellant and there is no law to deny the genuine liability incurred to be allowed as CENVAT credit under reverse charge mechanism, there is no question of depriving the appellant from the CENVAT Credit of the service tax paid on the outward transportation.

+ revenue at this juncture says that if appeal is allowed that shall defeat the purpose of law since no sale has occurred. It may be stated that Revenue has misconceived the scheme of taxation. Reverse charge mechanism is quite different from the normal taxation under this scheme, the service suffering tax entitles the recipient thereof to take credit of tax so suffered. Therefore, there cannot be denial of the benefit to the appellant according to such scheme of taxation. Accordingly, appeal is allowed.

(See 2016-TIOL-1328-CESTAT-MAD)


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