2021 (12) TMI 422 - AT - Central Excise

CENVAT Credit - input services - outward transport where the appellant delivered the goods on FOR destination basis to the factory/ plant side of the buyer - rate is inclusive of transportation, but excluding excise duty and education cess - place of removal - HELD THAT - The place of removal is not the factory gate, but the premises of the buyer. Admittedly the goods have been sold on FOR destination basis and sale price includes element of transportation. The appellant is entitled to cenvat credit on the outward freight / transportation - appeal allowed - decided in favor of appellant.

Summary

Issues: Disallowance of cenvat credit on outward transport

Analysis:
The dispute in this appeal pertains to the disallowance of cenvat credit on outward transport where the goods were delivered on FOR destination basis to the buyer's premises. The appellant availed cenvat credit of service tax paid on outward transportation during the period of January 2016 to June 2017.

During the audit, the Revenue objected to the cenvat credit claimed by the appellant on outward transportation, contending that the credit should only be allowed up to the place of removal, which was considered to be the factory gate of the appellant. A show cause notice was issued proposing the disallowance of the credit and imposition of a penalty.

The Assistant Commissioner, in the Order-in-original, upheld the show cause notice on merits but also applied Section 11AC(1)(d) of the Central Excise Act, concluding the proceedings as the appellant had deposited the tax in dispute along with interest and penalty within thirty days of the show cause notice.

The appellant appealed to the Commissioner (Appeals) challenging the application of Section 11AC(1)(d) and sought a decision on merit. The Commissioner (Appeals) ruled against the appellant, leading to the appeal before the Tribunal.

The appellant argued that the place of removal was the premises of the buyer, not the factory gate, as the goods were sold on FOR destination basis, inclusive of transportation in the sale price. The Tribunal, after considering the contentions, held that the appellant was entitled to cenvat credit on outward freight/transportation. The impugned order was set aside, and the appellant was granted consequential benefits, directing the refund of the deposited amount with interest.

In conclusion, the Tribunal allowed the appeal, emphasizing that the appellant was entitled to the cenvat credit on outward transportation, considering the sale terms and the inclusion of transportation costs in the sale price on FOR destination basis.