2015 (12) TMI 323 - AT - Service Tax

Denial of CENVAT Credit - outward freight charges - Place of removal - Held that - Observations would show that the original claim made by the appellants that they had cleared the goods to job workers was not verified before issue of show cause notice and was subsequently held to be incorrect because the appellant did not prove. This is an offence case and departmental officers seem to think that appellant should anticipate the requirements of the department and produce evidence at every stage. The audit party nor the Range Officer nor the original authority insist on verification of the documents or ask for the documents to check the claim of the appellant whether it is correct. In my opinion the claim of the appellant which has not been contradicted on the basis of evidence in the form of statement, mahazar or transportation documents, etc., no case has been made out by the Revenue. - Decided in favour of assessee.

Summary

Issues:
1. Admissibility of Cenvat credit on outward freight charges.
2. Failure of authorities to verify appellant's claim before issuing show cause notice.
3. Requirement of pre-deposit in appeal proceedings.

Analysis:
1. The case involved a dispute regarding the admissibility of Cenvat credit on outward freight charges. The jurisdictional Range Officer had raised concerns about the appellant availing Cenvat credit on Service Tax paid on outward freight charges. The appellant clarified in their reply that the credit was taken on material sent for further processing to the job worker's premises, not on goods cleared from the factory gate as outward freight. Despite this clarification, a show cause notice proposing to deny the credit was issued. The original adjudicating authority and the Commissioner (Appeals) both failed to consider the appellant's explanation adequately, leading to a flawed decision.

2. The authorities did not verify the appellant's claim before issuing the show cause notice. The original adjudicating authority and the Commissioner (Appeals) did not properly assess the appellant's submissions and evidence. The failure to verify the appellant's claim and the lack of proper consideration of the evidence led to an incorrect decision against the appellant. The appellant's contention that the goods were cleared to job workers was not adequately examined or verified by the departmental officers, resulting in an unjust denial of the Cenvat credit.

3. The issue of pre-deposit in appeal proceedings was also addressed in the judgment. The Member (T) of the Appellate Tribunal found that the whole proceedings leading to the Tribunal were unnecessary and unwarranted. Despite the learned AR's opposition to deciding the appeal at that stage, the Member decided to waive the requirement of pre-deposit and proceeded to take up the appeal for final decision. The Member emphasized that the appellant's claim, which was not contradicted with proper evidence, warranted allowing the appeal with consequential relief to the appellants.

In conclusion, the judgment highlighted the importance of verifying claims before issuing show cause notices, ensuring proper consideration of evidence, and addressing the requirement of pre-deposit in appeal proceedings. The decision favored the appellant, emphasizing the need for a thorough examination of claims and evidence in tax matters to avoid unjust outcomes.