2016 (11) TMI 471 - AT - Central Excise

Denial of Cenvat credit - GTA services - whether the demand only on the ground that the factory is considered as a place of removal and any outward transportation beyond the factory is not entitled for credit as per the definition of input service under Cenvat Credit Rules 2004 justified? - time bar - Held that - Cenvat credit of 6, 03, 113/- in respect of clearances to SEZ (paid and appropriated) and Cenvat credit of 24, 34, 593/- in respect of clearances to the customer on which no excise duty was paid are not eligible to the appellant. As already noted the disallowance of these credits were not contested on merit. We find no merit in the contest on time bar as recorded above. They are eligible for credit of remaining amount with reference to clearances to depot and consignment agents. The penalty amount also accordingly reduced equal to credit taken on clearance to customers as stated above. In these terms the appeal is partly allowed.

Summary

Issues involved:
1. Denial of Cenvat credit on service tax paid for GTA services beyond the factory premises.
2. Interpretation of the term "place of removal" under Cenvat Credit Rules, 2004.
3. Contention of bonafide belief for availing the credit.
4. Contestation on the time bar for availing the credit.
5. Eligibility of Cenvat credit on freight charges paid by buyers for clearances to customers on FOR basis.

Analysis:

1. The appeal challenged the denial of Cenvat credit on service tax paid for GTA services for transporting final products beyond the factory premises. The impugned order contended that the factory gate was the place of removal, thus disallowing the credit for outward transportation. However, the appellants argued that the place of removal includes their depot and consignment agents' premises. They presented a certificate detailing the clearances to depots and consignment agents, showing an amount attributable to service tax on outward transportation to these locations. The Tribunal noted that the basic criteria for availing Cenvat credit on outward freight is the sale and transfer of goods at a place other than the factory gate. The amendment replacing "from the place of removal" with "up to the place of removal" did not impact the eligibility of service tax paid on GTA services up to the depot or consignment agent's premises.

2. The issue of bonafide belief was raised regarding the availed credit. The appellants argued that their belief was supported by a Tribunal decision, which was later reversed by the High Court. However, the Tribunal found that the freight advance paid to transporters on behalf of customers, shown in the excise invoice but not considered for excise duty payment, did not justify a bonafide belief for availing credit on such freight payments. The Tribunal held that the appellants' awareness of the treatment of freight charges for excise duty purposes negated any bonafide belief in claiming credit on these payments.

3. The contestation on the time bar for availing the credit was also addressed. The Tribunal rejected the argument that there was a bonafide belief in claiming credit on freight charges paid by buyers for clearances to customers on FOR basis. The appellants' act of taking credit on such freight charges, where no excise duty was paid by them, was deemed not a bonafide act. Therefore, the Tribunal upheld the disallowance of credits for clearances to SEZ units and customers on which no excise duty was paid, while allowing credit for clearances to depot and consignment agents.

4. In conclusion, the Tribunal partially allowed the appeal, reducing the penalty amount equal to the credit taken on clearances to customers. The appellants were found eligible for credit on remaining amounts with reference to clearances to depot and consignment agents, while the disallowance of credits for SEZ units and customers was upheld. The decision was pronounced on 28/10/2016.