2016 (5) TMI 781 - AT - Central Excise

Admissibility of Cenvat credit - Job-work - GTA service tax paid when goods are manufactured by the job worker and cleared on payment of duty from the factory premises of job worker - Cenvat credit taken by the Respondent for the freight paid by them upto the factory premises of job worker while sending raw materials and also freight charges paid by Respondent from the job workers to the Depots of the Respondent while sending finished goods. Held that - premises of job worker is the place of removal and not the depot of the principal manufacturer, therefore, Cenvat credit of service tax paid by the Respondent upto the place of removal will be admissible. At the same time, service tax paid by the Respondent for transportation of goods from the job workers premises (place of removal) to the Depots of the Respondent has to be treated as services availed beyond the place of removal as there cannot be two manufacturers and two place of removals for the same goods. Demand - Invokation of extended period of limitation - Rule-14 of CCR, 2004 read with proviso to section 11A(1) of the Central Excise Act, 1944 - Held that - the matter is of interpretation of provisions of CCR, when a part of the service tax credit has been held to be admissible to the Respondent, therefore, extended period of 5 years cannot be invoked and demand has to be restricted to the normal period of limitation with respect to CENVAT Credit availed by the Respondent for transportation services availed from the factory premises of the job worker to the depot of the Respondents. Also the penalty imposed upon the Respondent under Rule 15(2) of CCR, 2004 read with Section 11AC ibid is not substantiable and is set aside. - Decided partly in favour of revenue

Summary

Issues Involved:
1. Admissibility of Cenvat Credit on freight paid for transportation of raw materials to job workers and finished goods from job workers to depots.
2. Determination of the "place of removal" for the purpose of Cenvat Credit.
3. Applicability of extended period of limitation for demanding duty and imposition of penalties.

Issue-wise Detailed Analysis:

1. Admissibility of Cenvat Credit on Freight Paid:

The Revenue argued that the Respondent, engaged in manufacturing various products, availed Cenvat Credit on service tax paid for freight charges related to transportation of raw materials to job workers and finished goods to depots. The Revenue contended that only the job worker, as the manufacturer, is eligible for Cenvat Credit on such services. They cited the cases of Commissioner of Central Excise, Indore vs. Dhananjay Confectionery (P) Ltd. and Lotte India Corporation Ltd. vs. Commr. Of C.Ex., Pondicherry to support their argument.

The Respondent countered that the services used up to the "place of removal," which includes depots, are covered under the definition of "Input service" in Rule 2(l) of the Cenvat Credit Rules, 2004. They cited several case laws, including CCE vs. Ultratech Cement Ltd. and M.P. Biscuits Private Ltd., to argue that the depots from where goods are sold to customers are considered the place of removal, thus making the Cenvat credit admissible.

2. Determination of the "Place of Removal":

The Tribunal analyzed the definition of "Input Service" and "place of removal" as per Rule 2(l) and Rule 2(qa) of the Cenvat Credit Rules, 2004, and Section 4(3)(c) of the Central Excise Act, 1944. It was concluded that the "place of removal" could be the factory, warehouse, or depot, but in this case, it must be related to the job worker's premises since the job worker paid the duty. The Tribunal held that the depots of the Respondent could not be considered the "place of removal" because the Respondent did not elect to discharge duty liability on the finished goods manufactured by the job worker.

3. Applicability of Extended Period of Limitation and Penalties:

The Tribunal observed that the issue involved interpretation of the provisions of the Cenvat Credit Rules, 2004, and that part of the service tax credit was admissible to the Respondent. Therefore, the extended period of five years for demanding duty under Rule 14 of the Cenvat Credit Rules, 2004, read with Section 11A(1) of the Central Excise Act, 1944, could not be invoked. The demand was restricted to the normal period of limitation. Consequently, the penalty imposed under Rule 15(2) of the Cenvat Credit Rules, 2004, read with Section 11AC of the Central Excise Act, 1944, was set aside.

Conclusion:

The appeal filed by the Revenue was allowed to the extent of remanding the case to the Adjudicating Authority for quantification of the demand within the normal period of limitation. The penalty imposed on the Respondent was set aside. The cross-objection filed by the Respondent was disposed of accordingly.