2016 (5) TMI 1280 - AT - Central Excise

Cenvat credit - entitlement - service tax paid on GTA services on outward transport - sale was on ex-factory basis - Held that - considering the large number of decisions holding in favour of the assessee regarding entitlement of cenvat credit on outward transportation and also considering that in appellant s own case the matter was decided in their favour based on examination on factual evidence by the Commissioner (Appeals) I find that the impugned order cannot be sustained. - Decided in favour of appellant

Summary

Issues:
1. Availment of cenvat credit on service tax paid on GTA services for outward transport.
2. Interpretation of ownership of goods in the context of cenvat credit eligibility.
3. Reliance on judicial precedents to determine cenvat credit eligibility.

Analysis:

Issue 1: Availment of cenvat credit on service tax paid on GTA services for outward transport
The appellants were engaged in manufacturing goods liable to central excise duty and were availing cenvat credit on duty paid on capital goods and input services. The Revenue contended that the appellants availed cenvat credit on service tax paid on GTA services for outward transport, which was deemed impermissible as the sale was on an ex-factory basis. Consequently, proceedings were initiated to recover the credit amount. The Original Authority confirmed the demand and imposed a penalty, which was upheld by the Commissioner (Appeals). The appellant challenged this decision in the appeal.

Issue 2: Interpretation of ownership of goods in the context of cenvat credit eligibility
The consultant for the appellants argued that based on purchase orders and invoices, the transactions were on FOR destination basis, where the goods' ownership remained with the appellants until delivery at the buyer's premises. They contended that they were eligible for input credit on transportation of final products. The consultant relied on various judicial decisions, including those of the Tribunal and High Courts, to support their claim. In contrast, the Revenue argued that outward transportation of goods to the buyers' premises did not qualify as an input service under the Cenvat Credit Rules.

Issue 3: Reliance on judicial precedents to determine cenvat credit eligibility
The Tribunal referred to previous decisions, such as the case of Bajaj Hindustan, where it was held that when the assessee bore the cost of transportation and insurance, they retained ownership of the goods until delivery at the buyer's premises, making them eligible for credit on outward transportation services. Additionally, the Tribunal cited the Karnataka High Court's decision in the case of Madras Cements Ltd., which emphasized that if the sale concluded only after delivery at the buyer's premises, the assessee was entitled to cenvat credit on service tax paid for outward transportation. Considering the precedents favoring the assessee and the factual examination by the Commissioner (Appeals) in the appellant's own case, the Tribunal concluded that the impugned order was unsustainable, setting it aside and allowing the appeal.