2011 (2) TMI 1323 - AT - Central Excise

Summary

Issues:
1. Eligibility of credit on GTA services used for transporting goods from factory to port of export.
2. Disallowance of credit by original authority and imposition of penalties.
3. Decision of the Commissioner (Appeals) setting aside the order of the original authority.
4. Interpretation of "place of removal" in the context of availing Cenvat credit on transportation services.
5. Applicability of Board's circular on determining eligibility for Cenvat credit.
6. Ownership transfer and conditions for availing credit on outward transportation services.
7. Relevance of previous judicial decisions in similar cases.

Eligibility of Credit on GTA Services:
The case involved a dispute regarding the eligibility of availing Cenvat credit on GTA services used for transporting goods from the factory to the port of export. The respondents, being manufacturers of gherkins, exported their products on f.o.b. basis and claimed Cenvat credit on GTA services. The issue arose when a show-cause notice alleged that the credit taken on outward freight was not eligible. The original authority disallowed the credit, imposed penalties, and ordered interest payment. However, the Commissioner (Appeals) set aside this order.

Decision of the Commissioner (Appeals):
The Commissioner (Appeals) accepted the respondents' view that the GTA services qualified as input services for availing credit. They argued that since the price was f.o.b. basis and ownership transfer occurred only upon obtaining the bill of lading, the conditions stipulated by the Board were satisfied. The Commissioner (Appeals) also relied on the decision of the High Court of Punjab and Haryana in a similar case, supporting the respondents' position.

Interpretation of "Place of Removal" for Cenvat Credit:
The determination of the "place of removal" was crucial in deciding the eligibility for availing credit on transportation services. The Board's circular emphasized that for a manufacturer/consignor, the eligibility depended on where the ownership transfer occurred. In cases where the sale was deemed to take place at the destination point, and the freight charges were integral to the price, credit on transportation services could be admissible.

Applicability of Board's Circular and Previous Judicial Decisions:
The Commissioner (Appeals) accepted the respondents' claim that the Board's circular applied to their case, despite the original authority not addressing this aspect. The ownership transfer through the bill of lading at the port of export was deemed reasonable by the Commissioner (Appeals), supported by the cited judgment of the High Court of Punjab and Haryana. The decision of the Larger Bench of the Tribunal, which was under appeal in another case, was not relied upon by the Commissioner (Appeals), making the stay order irrelevant in this context.

Conclusion:
The appeal by the Department was rejected, and the cross-objection supporting the Commissioner (Appeals) was disposed of. The judgment highlighted the importance of ownership transfer and the interpretation of "place of removal" in determining the eligibility for availing Cenvat credit on transportation services, ultimately upholding the decision of the Commissioner (Appeals) in favor of the respondents.