Service Tax on Goods Transport – Clearance to depot – eligible for credit.
Service Tax on Goods Transport has raised several doubts and quite a few doubts have been created by the Commissioners and the big boss the DG and Board usually takes its own time (normally a year or two) to clarify. The service tax paid on transporting goods to the depot is eligible as credit because input service includes 'outward transportation up to the place of removal'. Now, place of removal is not defined under the Cenvat Credit Rules. So Section 4 of the Central Excise Act which defines place of removal is to be used. But that Section 4 is applicable only for goods assessed to ad valorem duty. So somebody had a brilliant doubt - whether a manufacturer manufacturing and clearing goods on payment of duty at specified rates (for example cement) or on the basis of valuation with reference to retail sale price (for example refrigerators), and selling the goods from a depot, is also eligible to take credit of service tax paid on transportation of goods up to such depot. The doubt appears to be based on reasoning that since such goods are not charged to duty on the basis of valuation under section 4 of the Central Excise Act, the definition of the expression 'place of removal' given in that section would not apply in case of such goods.
Board has now clarified that in case of depot sales of goods, the credit of service tax paid on the transportation of goods up to such depot would be eligible, irrespective of the fact, whether the goods were chargeable to excise duty at specific rates or ad valorem rates on the basis of valuation under section 4 or 4A of the Central Excise Act.
There are certain other serious doubts, like can Service Tax on Goods Transport be paid from Cenvat account? Can credit be taken for transport from depot? Eventually Board will come up with clarifications.
Incidentally has the Board stopped issuing circulars? This important clarification is contained in a letter addressed to Chief Commissioners and Commissioners and so does not get the wide publicity it should. Clarifications meant for the trade should be made available to the trade , not hidden from them.
Board’s F.No. Dated : February 2, 2006