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F.No. 137/3/2006-CX.4

Government of India
Ministry of Finance
Department of Revenue
Central Board of Excise & Customs

Dated : February 2, 2006

Subject : Eligibility of CENVAT credit of service tax paid on goods transported from factory to depot and sold therefrom -reg.

It may be recalled that under the CENVAT Credit Rules, 2004 (hereinafter referred to as 'Credit Rules'), the difinition of 'input service' includes 'outward transportation up to the place of removal'. The expression 'place of removal' has not been defined in the Credit Rules and therefore in terms of rule 2 (t) of the said Rules, the said expression shall have the same meanings assigned to it in the Central Excise Act, 1944 or the Finance Act, 1944. The expresison 'place of removal' has been defined under Section 4 of the Central Excsie Act, as per which it is (a) a factory (in case of factory gate sale); (b) a warehouse (in case goods permitted to be stored without payment of duty); or (c) a depot (in case of depotsale). Therefore, in case excisable goods are sold from depot after their clearance from the factory, the manufacturer is eligible to take credit of service tax paid on trasportation of goods up to such depot.

02. In this regard a doubt has arisen as to 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.

03. The matter has been examined at the level of the Central Board of Excise and Customs. It has been observed that the availament of credit and valuation for payment of duty are two independent issues. Further, the provisions under rule 2(t) of the CENVAT Credit Rules refers to definitions under the Central Excise Act, 1944 and the Finance Act, 1994 for uniform understanding of the words and phrases used in the Credit Rules. Therefore, if an expression is not defined in the Credit Rules but is defined under a particular section of the Central Excise Act, it shall be applicable to all goods for purposes of the Credit Rules, irrespective of whether or not the said section is applicable for the purposes of working out the duty on such goods.

04. In view of the above, the undersigned is directed to state 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, irresepective of the fact, whether the goods were chargebale 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.

(Gautam Bhattacharya)
Commissioner (Service Tax)