2014 (8) TMI 453 - AT - Service Tax

Eligibility for the CENVAT credit - outward transportation - Held that - CENVAT Credit Rules, 2004, was amended so as to replace the words from the place of removal with the words up to the place of removal and this amendment came into effect from 1-4-2008 onwards. As a result of this amendment, the CENVAT credit in respect of outward transportation beyond the place of removal was excluded from the scope of input service . Therefore, for the period on or after 1-4-2008 CENVAT credit on outward transportation is not available. Therefore, the department is right in denying the benefit of CENVAT credit on the outward transportation incurred beyond the place of removal. Accordingly, the appellant-assessee is liable to reverse the credit of CENVAT credit taken, if any, along with interest thereon during the impugned period During the material period, as per the decision of the Larger Bench in the case of ABB Ltd. case 2009 (5) TMI 48 - CESTAT, BANGALORE , the appellant was held to be eligible for the credit which decision was reversed by the Hon ble Karnataka High Court for the period after 1-4-2008 vide the judgment cited (2011 (1) TMI 748 - KARNATAKA HIGH COURT). Therefore, the assessee cannot be alleged to have committed either suppression or fraud in the matter and therefore, imposition of equivalent of penalty on the assessee is totally unwarranted - Assessee directed to reverse credit taken - Decided partly in favour of assessee.

Summary

Issues involved: Eligibility for CENVAT credit of service tax paid on port charges for outward transportation of finished products post-amendment, imposition of penalties, and reversal of CENVAT credit.

Eligibility for CENVAT credit of service tax paid on port charges: The case involved a dispute regarding the eligibility of the appellant for CENVAT credit on service tax paid for outward transportation of finished products post-amendment. The department contended that post-amendment, CENVAT credit on outward transportation beyond the place of removal was excluded from the scope of 'input service'. The appellant argued that the expenditure was incurred after the goods were removed from the factory and that transportation costs did not form part of the assessable value of cleared goods. However, the appellant acknowledged that post the Karnataka High Court decision, they were not eligible for the credit. The tribunal observed that the CENVAT Credit Rules were amended to exclude outward transportation beyond the place of removal from 'input service' scope, effective from 1-4-2008. Consequently, the tribunal upheld the department's decision to deny CENVAT credit on outward transportation beyond the place of removal.

Imposition of penalties: The tribunal considered the period in question and the legal precedents, particularly the Karnataka High Court judgment in the ABB Ltd. case. It noted that during the material period, the appellant was considered eligible for the credit based on the Larger Bench decision in the ABB Ltd. case. However, the Karnataka High Court's subsequent judgment post-1-4-2008 reversed this decision. The tribunal concluded that the appellant could not be accused of suppression or fraud, given the legal developments. Consequently, the tribunal deemed the imposition of an equivalent penalty on the appellant unwarranted and set it aside. The appellant was directed to reverse the CENVAT credit taken along with interest.

Reversal of CENVAT credit: The tribunal dismissed the appeals and disposed of the stay applications after considering the settled issue of CENVAT credit eligibility post-amendment. It directed the appellant to reverse any CENVAT credit taken on outward transportation along with interest, in line with the amendment excluding such credit from 'input service' scope. The tribunal's decision was based on the legal provisions, amendments, and relevant judicial precedents, ensuring compliance with the law and established principles.

Overall, the tribunal's judgment addressed the issues of CENVAT credit eligibility, penalties, and reversal of credit in a comprehensive manner, considering legal provisions, amendments, and judicial decisions to arrive at a reasoned decision that upheld the law and principles governing the matter at hand.