2016 (11) TMI 1386 - AT - Service Tax

CENVAT credit - Outward transportation service - eligible input service or not? - Held that - appellant had not produced any documentary evidence in support of their contention that ownership and property of the goods cleared by them remained with them till delivery of same at buyer s end and that freight and insurance charges were borne by them - proper course in this appeal is to remand the matter for de novo consideration - penalty set aside - appeal allowed by way of remand.

Summary

Issues Involved: Disallowance of cenvat credit on outward transportation for specific periods, eligibility of credit on transportation up to buyer's end, ownership and property of goods, remand for de novo consideration based on legal parameters, imposition of penalties under Rule 15 (1) of CCR 2004.

Analysis:

The primary issue in dispute pertains to the disallowance of cenvat credit on outward transportation by the appellant for specific periods based on the contention that such transportation does not qualify as an "input service" under rule 2 (l) of the Cenvat Credit Rules, 2004. The Commissioner (Appeals) upheld the lower authority's decision, leading to the current appeal.

During the proceedings, the appellant's counsel argued that since the clearances were made on F.O.R. Destination basis and goods were transported in refrigerated trucks to the buyer's end, they should be eligible for cenvat credit on outward transportation. Reference was made to a relevant judgment by the Hon'ble High Court of Karnataka in a similar matter involving Madras Cements Ltd. The appellant had paid the disputed amounts under protest, with interest pending on one amount.

On the other hand, the respondent's representative contended that the appellant failed to provide documentary evidence supporting their claim that they retained ownership and bore freight and insurance charges until delivery at the buyer's end, thus making them ineligible for the credit. Reference was made to post-Madras Cements judgments where matters were remanded for eligibility assessment based on set parameters.

After considering the arguments from both sides and reviewing the case facts, the Tribunal concluded that the appropriate course of action was to remand the matter for fresh consideration in line with the legal parameters established by the Hon'ble Karnataka High Court in the Madras Cements Ltd. case. Additionally, the Tribunal found merit in the appellant's plea regarding penalties, deeming it unjust to impose penalties given the recurrent nature of the issue and the need for further clarification. Consequently, the penalty imposed under Rule 15 (1) of CCR 2004 was deemed unsustainable and set aside, with the case remanded to the original adjudicating authority as per the specified direction.

In conclusion, the appeal was disposed of with the decision to remand the matter for reevaluation based on the legal parameters outlined by the Hon'ble Karnataka High Court, while also setting aside the penalty imposed on the appellant under Rule 15 (1) of CCR 2004.