2015 (1) TMI 851 - AT - Central Excise

Availability of credit on freight charges incurred for FOR destination sale - Imposition of interest and penalty - Held that - Appellants have failed to produce any evidence before this authority as well as the adjudicating authority that all the aforementioned three conditions were satisfied by the appellants. In this regard the contention of the appellants is that in fact in respect of the said transportation of the appellant s products to the buyer s premises, the appellants had made the payment of the transportation charges; thus, they (appellants) were responsible for the delivery of the goods to the buyer s premises; this fact indicates that the sale/delivery of the goods was on the FOR basis and therefore, the credit of service tax on such service of outward transportation is admissible to the appellants. However, the appellants could not adduce any evidence of FOR destination sale viz. copy of the relevant agreement entered into between appellants and the concerned buyers, sale invoices etc. Merely on the ground that the appellant-assessee arranged the transportation for delivery of the goods to the buyer s premises, they cannot be permitted to claim such transportation as an input service under Rule 2(1) of the Cenvat Credit Rules, 2004. In view of the above facts and rulings, I am inclined to hold that the said input service credit of ₹ 1,47,108/- on such service of outward transportation is not admissible to the appellants. Therefore, the above demand of ₹ 1,47,108/- and interest thereon is justified and hence the same is upheld. - Thus intention to avail fraudulent credit could not be imputed. I find that various forums have taken different stand and certainly on the issue was not there. I would have agreed with non invokation of penal provisions in the present case as per counsel s contention but facts indicated in preceding paragraphs do not lead to conclusion as eligibility of FOR clearance itself is negated. Penal provisions are justified in the case and penalty is rightly imposable. Following decision of Lafarge India (P) Ltd.- 2011 (1) TMI 251 - CESTAT, NEW DELHI - Decided against assessee.

Summary

Issues:
- Availability of credit on outward transportation services under Cenvat Credit Rules, 2004.
- Imposition of penalty on the appellant for non-payment of service tax on outward freight.

Analysis:
1. Issue 1 - Availability of credit on outward transportation services under Cenvat Credit Rules, 2004:
The case involved the appellant's appeal against the demand raised by the Adjudicating Authority for payment of service tax on outward transportation services. The scrutiny revealed that the appellant took credit for service tax paid on outward transportation, which the department contended was not covered under the definition of 'input service' under Rule 2(1) of the Cenvat Credit Rules, 2004. The Adjudicating Authority confirmed the demand and imposed penalties. The Commissioner (Appeal) upheld the decision, leading to the appeal before the Tribunal.

2. The appellant argued that the issue revolved around the credit availability on outward freight for goods sold on a FOR basis, where the value of freight was included in the goods' value but not in the transaction value. The appellant relied on the definition of input service in the Cenvat Credit Rule during the relevant time. The counsel highlighted conflicting interpretations at different levels, citing a favorable decision by the Larger Bench of CESTAT in a similar case. However, an amendment in 2008 clarified that input service credit on outward freight was excluded from eligibility beyond the place of removal.

3. The Tribunal examined the records and concluded that the appellant failed to provide evidence of FOR destination sale, as required for availing credit on outward transportation services. The definition of 'outward transportation upto place of removal' under Rule 2(1)(ii) of the Cenvat Credit Rules indicated that transportation beyond the place of removal was not considered an input service. The Tribunal referred to Board's Circular and previous judgments to support the decision that the credit of service tax on outward transportation was not admissible to the appellant in this case.

4. Issue 2 - Imposition of penalty on the appellant for non-payment of service tax on outward freight:
The appellant raised concerns regarding the imposition of penalties, arguing that the issue was subject to various interpretations and the invocation of the extended period for penalties was not sustainable. The counsel emphasized that the matter was one of interpretation, not clandestine activity, and penalties were unwarranted. However, the Adjudicating Authority and Commissioner (Appeal) found no evidence to support the appellant's claim for FOR destination sale, leading to the confirmation of demand, penalties, and interest.

5. The Tribunal upheld the findings of the Commissioner (Appeal) regarding the non-eligibility of credit and the imposition of penalties, dismissing the appeal. Despite the appellant's contentions and differing views in various forums, the Tribunal found that the eligibility of FOR clearance was negated, justifying the imposition of penalties in this case.

In conclusion, the Tribunal upheld the decision on both issues, emphasizing the importance of providing evidence for credit eligibility and the justification for imposing penalties based on the circumstances of the case.