2021 (3) TMI 480 - AT - Central Excise

CENVAT Credit - freight amount reimbursed to goods transport operators - services used in relation to the outward transportation - place of removal - HELD THAT - The present issue is no more res-integra in view of the recent decision of the Hon ble Supreme Court in the case of COMMISSIONER OF CENTRAL EXCISE, BELGAUM VERSUS M/S. VASAVADATTA CEMENTS LTD. 2018 (3) TMI 993 - SUPREME COURT where it was held that clearance of final products from the place of removal and the subsequent amendment by Notification 10/2008-C.E. (N.T.), dated 1-3-2008 substituting the word from in the said phrase in place of upto makes it clear that transportation charges were included in the phrase clearance from the place of removal upto the date of the said substitution and it cannot be included within the phrase activities relating to business . The credit is allowed - Appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Interpretation of input service under Cenvat Credit Rules, 2004 for availing service tax credit.
2. Eligibility of availing service tax credit on outward transportation beyond the place of removal.
3. Application of Reverse Charge Mechanism (RCM) for service tax on freight amount reimbursed to goods transport operators.
4. Imposition of penalty under Rule 15(2) of Cenvat Credit Rules, 2004 read with Section 11AC of the Central Excise Act, 1944.

Analysis:
1. The case involved the appellants engaged in manufacturing electric meters and providing taxable services. They availed services of goods transport operators for clearing excisable goods and discharged service tax under Reverse Charge Mechanism (RCM) on freight. Show-cause notices alleged ineligibility to avail service tax credit on outward freight beyond the place of removal. The adjudicating authority confirmed the demand, interest, and imposed penalty.

2. On appeal, the lower authority upheld the order, leading to the present appeals before the Tribunal. The issue revolved around the interpretation of input service under Cenvat Credit Rules, 2004. The Tribunal referred to a recent Supreme Court decision in Commr. of Central Excise, Belgaum Vs. Vasavadatta Cements Ltd. The Court clarified the definition of input service, emphasizing services used by the manufacturer in relation to the manufacture and clearance of final products from the place of removal.

3. The Tribunal analyzed the definition of input service, focusing on the phrase "from the place of removal." It determined that Cenvat credit for transportation of final products from the place of removal up to the first point, whether depot or customer, should be allowed. The Tribunal noted an amendment effective from 1-4-2008, which substituted "from the place of removal" with "upto the place of removal," limiting Cenvat credit availability.

4. By following the Supreme Court's ruling, the Tribunal set aside the impugned orders, allowing the appeals filed by the appellants. The judgment clarified the scope of availing service tax credit on outward transportation and emphasized adherence to the amended rules for Cenvat credit eligibility.