2014 (7) TMI 1013 - AT - Service Tax

Denial of CENVAT Credit - GTA Service - Whether in respect of clearances from the factory gate directly to the customers the appellant would be eligible for cenvat credit in respect of GTA services availed for transportation of cement upto the customer s premises - Held that - the prima facie the definition of place of removal in Section 4 of the Central Excise Act, 1944 can be adopted for the purpose of Cenvat Credit Rules, 2004 only in those cases where the final product is chargeable to duty at an ad valorem rate on the value determined under Section 4 i.e. when the provisions of Section 4 are applicable for determining the duty leviable on the goods and the definition of place of removal in Section 4 would not be applicable for the purpose of Cenvat Credit Rules, 2004 when the final product is chargeable to duty at a specific rate or of at ad valorem rate, on the value determined under Section 4A or on tariff value fixed under Section 3(2). Prima facie when the rate of duty on the final product is specific, the definition of place of removal , as given in Section 4, which is only for the purpose of this section, cannot be adopted for the purpose of Cenvat Credit Rules and in such cases, the place of removal would be the place on removal from which duty is payable on the goods, which in this case, would be the factory gate. Therefore, the Appellant cannot be said to be having prima facie case in their favour and some conditions have to be imposed for safeguarding the interests of Revenue. - stay granted partly.

Summary

Issues:
Dispute over eligibility for Cenvat credit in respect of GTA services for transportation of cement directly to customers from factory gate. Interpretation of 'place of removal' for Cenvat credit purposes. Applicability of Board Circulars and legal precedents. Prima facie case for waiver from pre-deposit requirements.

Analysis:

Issue 1: Eligibility for Cenvat Credit
The appellant claimed eligibility for Cenvat credit on GTA services for transporting cement directly to customers on FOR destination basis. The Department contested this, arguing the sales were not FOR destination, thus disqualifying the appellant from Cenvat credit. A show cause notice was issued for recovery of wrongly taken credit. The Commissioner upheld the demand, imposing penalties. The appellant filed an appeal against this decision, seeking waiver from pre-deposit requirements.

Issue 2: Interpretation of 'Place of Removal'
The key contention revolved around the interpretation of 'place of removal' for Cenvat credit purposes. The appellant relied on Board Circulars and legal precedents to support their claim that the customer's premises should be considered the 'place of removal' for availing Cenvat credit. The Department argued that the factory gate should be deemed the 'place of removal' due to the specific rate duty on cement. The Tribunal analyzed the definitions under the Central Excise Act and Cenvat Credit Rules to determine the appropriate interpretation.

Analysis of Tribunal's Decision:
The Tribunal opined that the definition of 'place of removal' in the Central Excise Act applies only when duty is chargeable at an ad valorem rate under Section 4. In cases of specific rate duty, the 'place of removal' would be where duty is payable, typically the factory gate. Legal fictions, such as the extended definition under Section 4(3)(c), should not be applied beyond their intended scope. The Tribunal highlighted that applying the 'place of removal' definition to Cenvat credit in specific rate duty scenarios could lead to inconsistencies in the tax system.

The Tribunal referenced the Karnataka High Court's judgment, emphasizing that the 'place of removal' definition in Section 4(3)(c) is limited to that section. Consequently, the Tribunal concluded that the appellant did not have a prima facie case for waiver from pre-deposit requirements. It directed the appellant to deposit a specified amount within a set timeframe, with waiver and stay of recovery subject to compliance.

In conclusion, the Tribunal's decision clarified the interpretation of 'place of removal' for Cenvat credit eligibility in cases of specific rate duty, emphasizing the limitations of legal fictions and ensuring consistency in tax treatment. The judgment underscored the importance of adhering to statutory definitions and the specific context of legal provisions to determine entitlement to Cenvat credit.