2017 (10) TMI 1116 - AT - Central Excise

CENVAT credit - outward freight - whether appellant is eligible to avail CENVAT credit of service tax paid on outward freight paid by him during 2010-11 to December 2012 and for the month of March 2013? - Held that - all clearances to their purchasers were ex-works of the recipient of the goods (free of road) - appellants are eligible to avail the CENVAT Credit of the service tax paid on outward freight transaction value - matter is remitted back to the adjudicating authority for limited purpose of arriving at the quantum of CENVAT that is available to the appellant on the service tax paid on the outward freight under transaction value as per the Section 4 of the Central Excise Act. Liability of interest - Held that - based upon the quantum which has been arrived at by the adjudicating authority, the appellant has to discharge the interest on the amount of CENVAT credit which has been held ineligible. Penalty - Held that - since the issue is of interpretation, there is no warrant to visit the appellant with any penalties. Appeal allowed by way of remand.

Summary

Issues:
- Eligibility of appellant to avail CENVAT credit of service tax paid on outward freight
- Applicability of Section 4 and Section 4A of the Central Excise Act, 1944
- Interpretation of the definition of place of removal in relation to CENVAT credit

Eligibility of CENVAT Credit:
The appeal revolved around the eligibility of the appellant to claim CENVAT credit for service tax paid on outward freight during specific periods. The lower authorities had denied the credit, citing the valuation of goods under Sections 4 and 4A of the Central Excise Act, 1944. The appellant contended that most transactions were under Section 4A and argued that the concept of place of removal under Section 4 should apply to Section 4A as well. The appellant supported this argument with purchase orders indicating ex-works pricing, triggering service tax liability on freight charges. The appellate member noted the submission and found merit in the appellant's claim, directing a reconsideration by the lower authorities to determine the exact CENVAT credit available.

Applicability of Section 4 and Section 4A:
The crux of the dispute lay in the interpretation of Sections 4 and 4A of the Central Excise Act, 1944 concerning the valuation of goods and the definition of place of removal. The appellant's representative argued that the definition of place of removal under Section 4 should extend to Section 4A, enabling the appellant to claim CENVAT credit on outward freight. In contrast, the respondent contended that Section 4's provisions could not be applied to Section 4A, emphasizing that Section 4A's value calculation encompassed all costs related to finished goods. The appellate member acknowledged the differing interpretations but ultimately sided with the appellant's view, allowing for the possibility of claiming CENVAT credit on service tax paid for outward transportation.

Interpretation of Place of Removal for CENVAT Credit:
A critical aspect of the judgment was the interpretation of the definition of place of removal in the context of availing CENVAT credit on service tax for outward freight. The appellant argued that the goods' delivery at the purchaser's premises should constitute the place of removal, justifying the credit claim. The respondent, however, maintained that the importation of Section 4's place of removal definition into Section 4A was impermissible based on previous tribunal decisions. Despite the conflicting views, the appellate member agreed with the appellant's stance, highlighting that all clearances to purchasers were ex-works, supporting the eligibility for CENVAT credit on service tax paid for outward freight. Consequently, the matter was remitted to the adjudicating authority to determine the precise quantum of credit available.

In summary, the judgment addressed the appellant's entitlement to CENVAT credit for service tax on outward freight, the interplay between Sections 4 and 4A of the Central Excise Act, and the interpretation of the place of removal for credit eligibility. The decision favored the appellant's position, emphasizing the need for a reevaluation by the lower authorities to quantify the credit amount accurately. The ruling underscored the importance of aligning valuation provisions with credit claims and highlighted the significance of the place of removal in determining CENVAT credit eligibility.