2019 (3) TMI 1669 - AT - Central Excise

CENVAT Credit - input services - outward freight - period February, 2014 to June, 2015 - HELD THAT - The supply of HDPE bags by the appellant to the customer is on FOR basis and the insurance is taken out by them and transportation charges are borne by them. The issue is decided in the case of M/S SANGHI INDUSTRIES LTD. VERSUS C.C.E. KUTCH (GANDHIDHAM) 2019 (2) TMI 1488 - CESTAT AHMEDABAD and M/S ULTRATECH CEMENT LTD. VERSUS C.C.E. KUTCH (GANDHIDHAM) 2019 (2) TMI 1487 - CESTAT AHMEDABAD where it was held that Appellants are eligible for the cenvat credit of service tax paid on outward freight. Appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Eligibility of CENVAT credit on service tax paid on outward freight.
2. Interpretation of sale agreement terms regarding ownership and risk in transit.
3. Applicability of CBEC Circular on CENVAT credit for transportation charges.

Analysis:
1. The appellant availed CENVAT credit of service tax paid on outward freight, which the revenue contended was not eligible. Two show cause notices were issued for reversal of the credit along with interest and penalties. The adjudicating authority and the first appellate authority upheld the demands. The appellant argued that the consignment was on FOR basis, citing a purchase order from the customer and transportation charges paid by them. Reference was made to a CBEC Circular supporting their claim. The Tribunal noted the purchase order specifying FOR-NFCL site, indicating the supply was on FOR basis, and the insurance and transportation charges were borne by the appellant. Relying on precedents from the Ahmedabad bench, the Tribunal held in favor of the appellant, stating that the Circular supported their position.

2. The departmental representative argued that the sale agreement was not on FOR basis, and the value of goods was ascertainable at the factory gate, making service tax paid on GTA services beyond the gate inadmissible as CENVAT credit. It was contended that the appellant failed to prove the goods were on FOR basis. The Tribunal, after examining the purchase order and related documents, concluded that the supply was indeed on FOR basis, as evidenced by the terms of the purchase order and the payment of transportation charges by the appellant. The Tribunal found the appellant's position supported by the Circular and relevant precedents, setting aside the impugned order and allowing the appeal.

3. The Tribunal's decision was based on the factual matrix presented, highlighting the terms of the purchase order, mode of dispatch, and payment of transportation charges by the appellant. The Tribunal found that the Circular and precedents from the Ahmedabad bench directly applied to the case, supporting the appellant's eligibility for CENVAT credit on outward freight. The impugned order was deemed unsustainable and was set aside, with the appeal being allowed in favor of the appellant.