2014 (4) TMI 719 - AT - Central Excise

CENVAT Credit - input service - courier service availed by them for despatch of the final products to their customers - Bar of limitation - Difference of opinion - matter referred to larger bench with following questions - Whether bar of limitation as prescribed under rule 14 of the Cenvat credit rule 2004 read with Section 11A of Central Excise Act, 1944 is invokable and Cenvat credit was not recoverable for extended period as held by Member (Judicial). Or Whether bar of limitation as prescribed under rule 14 of the Cenvat credit rule 2004 read with Section 11A was not attracted and Cenvat credit was recoverable as held by Member (Technical).

Issues Involved:
1. Eligibility for Cenvat credit on service tax paid for courier services used for dispatching goods to customers.
2. Interpretation of 'input service' under Rule 2(l) of Cenvat Credit Rules, 2004.
3. Applicability of the extended period of limitation for recovery of Cenvat credit.
4. Imposition of penalty under Rule 15 of CCR, 2004 read with Section 11AC of the Central Excise Act, 1944.

Issue-wise Detailed Analysis:

1. Eligibility for Cenvat Credit on Service Tax Paid for Courier Services:
The appellant, engaged in the manufacture of automobile parts, availed Cenvat credit for service tax paid on courier services used to dispatch final products to customers. The department contended that such courier services, being outward freight from the place of removal, were not covered under the definition of 'input service' as per Rule 2(l) of CCR, 2004. The appellant cited the Larger Bench decision in ABB Ltd. vs. CCE & ST, Bangalore, which held that services for outward transportation from the place of removal qualify as 'input service'. The Tribunal, following this precedent, concluded that for the period prior to 1/3/08, the courier services used for dispatching goods from the place of removal were indeed eligible for Cenvat credit.

2. Interpretation of 'Input Service' Under Rule 2(l) of CCR, 2004:
The definition of 'input service' under Rule 2(l) was amended effective 1/3/08, removing the phrase "and clearance of final product from the place of removal". For the period before this amendment, services used for clearance from the place of removal were included. The Tribunal affirmed that, based on the ABB Ltd. decision, the service of outward transportation was considered an 'activity related to business' and thus eligible for Cenvat credit, irrespective of whether the freight cost was included in the transaction value of the goods.

3. Applicability of the Extended Period of Limitation:
The Tribunal considered whether the extended period of limitation under Rule 14 of CCR, 2004 read with Section 11A of the Central Excise Act, 1944, was applicable. The Tribunal noted conflicting judgments on the eligibility of Cenvat credit for outward transportation services. It referenced the decision in Ultra Cement Ltd., which held that conflicting judicial opinions precluded the invocation of the extended limitation period. Consequently, the Tribunal ruled that the major part of the demand was time-barred, remanding the case for quantification of the demand within the normal limitation period.

4. Imposition of Penalty:
The Tribunal found no evidence of suppression or malafide intent by the appellant. Given the bona fide interpretation of the law and the conflicting judicial precedents, the Tribunal concluded that the imposition of penalty was not justified.

Separate Judgments Delivered:
Member (Judicial):
The Member (Judicial) concluded that for goods cleared under specific duty rates or MRP-based assessment under Section 4A, the 'place of removal' is the factory gate, making Cenvat credit on courier services beyond the factory gate ineligible. However, the extended period of limitation was not applicable due to conflicting judgments, leading to a partial remand for quantification of the demand within the normal limitation period.

Member (Technical):
The Member (Technical) concurred on the ineligibility of Cenvat credit for courier services beyond the factory gate for goods assessed under Section 4A or specific duty rates. However, he disagreed on the limitation aspect, asserting that there was no conflict in judgments regarding the applicability of the extended period of limitation for such assessments, thereby upholding the demand for the entire period.

Difference of Opinion:
The Members differed on whether the extended period of limitation was applicable. The matter was framed for resolution on whether the extended period under Rule 14 of CCR, 2004 read with Section 11A was invokable (as held by Member (Technical)) or not (as held by Member (Judicial)).

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