Inputs short received – CENVAT credit cannot be denied of tax paid on Inward Transportation service
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 including Inward Transportation Service and paying duty on their final product. At the end of the year, the appellant prepares a balance-sheet and accounts for Measurement Tolerance in their balance sheet showing shortage of gas lost during the supply as final product. Revenue is of the view that the shortage has occurred of inputs, consequently the input service credit is not admissible.
The original authority confirmed the demand and the Commissioner (Appeals) was all too happy to uphold the same.
Before the CESTAT, the appellant pointed out that although there is an allegation of "shortage of inputs" the credit is not denied on the shortages but what is denied is the "input service credit on transportation". Moreover, the Measurement Tolerance has occurred on account of receipt of inputs and supply of finished goods. In these circumstances, whatever shortage may occur that may be lost during the process of manufacturing and, therefore, credit cannot be denied and the order should be set aside.
The AR did his job – reiterate the findings in the impugned order.
The Bench while allowing the appeal 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 is 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 appellant has received the input in short quantity. Therefore, service tax on Inward Transportation is fully allowable as input service."