2023 (10) TMI 1464 - AT - Service Tax

Recovery of Cenvat credit wrongly availed on the input services received - place of removal - interpretation of Rule 2 (l) of the Cenvat Credit Rules, 2004 as amended from time to time - HELD THAT - From the plain reading of the above rule it is evident that the input services have been defined to mean any service used by the manufacturer, directly or indirectly, in or in relation to manufacture of final products and clearance of final product up to the place of removal - the place of removal can be different from the factory gate and the value for determination of duty payable will be the value at which the goods are sold from the place of removal - it is settled position in law that in case of sale of goods from any premises other than at the factory gate the value of excisable goods for payment of duty is to be determined at the place of removal i.e. the depot/ direct shop, premises of consignment agent or by whatever name it is called. Rule 2 (l) provides that the input service is the services used directly or in-directly, in or in relation to manufacture and clearance of the finished products up to the place of removal. Undisputedly, the place of removal in the present case is the direct shop in Kolkata and the claim of appellant that the duty is paid on the value determined on the basis of sale value from the direct shop is not disputed in the impugned order - The assessee has been discharging the Excise Duty on the bikes sold from direct shop at Kolkata at a value at which bikes are sold from Kolkata direct shop and not at any notional value at the time of dispatch of bikes from the factory gate. However adjudicating authority has not given any finding on this submission. There is no justification for holding that the direct shop at Kolkata from where the bikes were finally sold by the appellant is not the place of removal as per Rule 2 (qa) of the CENVAT Credit Rules, 2004. The expenses incurred on rent, repair and maintenance of the direct shop cannot be excluded from the assessable value for the payment of Central Excise Duty and for the same reason the service tax paid in respect of these services received at depot cannot be denied. There is no justification for not allowing the credit in respect of input services received at the direct shop in Kolkata from where the goods are finally sold by the appellant after clearance from the factory. There is no merit in the impugned order and the same is set aside. As the demand for duty is set aside the demand for interest and penalty imposed is also set aside. Appeal allowed.

Summary

Issues Involved:

1. Determination of "place of removal" for the purpose of availing CENVAT credit.
2. Eligibility of CENVAT credit on services used at the direct shop in Kolkata.
3. Interpretation of Rule 2(l) of the Cenvat Credit Rules, 2004.
4. Inclusion of expenses in the assessable value for duty determination.
5. Applicability of interest and penalties under the Central Excise Act, 1944.

Issue-wise Detailed Analysis:

1. Determination of "Place of Removal":
The primary issue was whether the direct shop in Kolkata qualifies as the "place of removal" under Section 4 of the Central Excise Act, 1944. The definition includes a factory, warehouse, or depot from where goods are sold post-clearance. The appellant contended that the shop was a depot and thus a place of removal. However, the department argued that it was beyond the factory premises and not substantiated with evidence as a depot or consignment agent's premises. The Tribunal concluded that the shop could be considered a place of removal since the appellant paid duty based on the sale value from the shop, aligning with the definition and established judicial precedents.

2. Eligibility of CENVAT Credit on Services Used at Direct Shop:
The appellant claimed CENVAT credit on rent, repair, and maintenance services for the Kolkata shop, arguing these were input services related to the clearance of goods up to the place of removal. The Tribunal found that since the shop was the place of removal, expenses incurred there, including rent and maintenance, were part of the assessable value for duty purposes. Thus, the credit for these services was deemed admissible.

3. Interpretation of Rule 2(l) of the Cenvat Credit Rules, 2004:
Rule 2(l) defines "input service" as any service used by a manufacturer in or in relation to the manufacture and clearance of final products up to the place of removal. The Tribunal emphasized that this includes services used at the place of removal, supporting the appellant's claim. The Tribunal referenced previous decisions, such as Metro Shoes Pvt. Ltd., affirming that services utilized at a depot or similar premises qualify for CENVAT credit.

4. Inclusion of Expenses in Assessable Value:
The Tribunal noted that the costs of rent, repair, and maintenance of the shop were included in the assessable value of the motorcycles. As per CBEC's clarification, the assessable value is determined at the place of removal, and thus, these expenses were legitimate components of the value on which duty was paid, justifying the credit.

5. Applicability of Interest and Penalties:
The appellant argued against the imposition of interest and penalties, citing a bona fide interpretation of the law. The Tribunal agreed, noting that the issue involved a legal interpretation and not suppression of facts. Consequently, the demand for interest and penalties was set aside.

Conclusion:
The Tribunal allowed the appeal, holding that the direct shop in Kolkata was the place of removal, and the appellant was entitled to CENVAT credit on services used there. The impugned order was set aside, and the demands for duty, interest, and penalties were annulled.