2024 (5) TMI 887 - AT - Central Excise

CENVAT Credit - input services (outward freight charges) have been used subsequent to the place of removal - HELD THAT - In the present case, the Appellant has produced Chartered Accountant s Certificate to the effect that the Appellant is responsible for delivery of the goods upto the doorstep of the buyers. This Certificate also shows that the Appellant has borne freight charges and has not passed on the burden to the buyer. Therefore, the facts are identical to the cited case of Ultratech Cement Ltd 2019 (2) TMI 1487 - CESTAT AHMEDABAD and M/s. Sanghi Industries Ltd. 2019 (2) TMI 1488 - CESTAT AHMEDABAD cases decided by the Ahmedabad Bench. The Cenvat Credit is specifically denied to the Section 4 goods, since abatement is provided for the outward freight charges for arriving at the assessable value. Notably such abatement is available even if the outward freight charges are collected from the buyers as held in Ispat Industries case 2015 (10) TMI 613 - SUPREME COURT by the Hon ble Supreme Court - the Cenvat Credit taken on the Service Tax paid on outward freight charges cannot be denied to the Appellant. The Appellant governed by Section 4A valuation for their clearance, cannot be denied the benefit of Cenvat Credit on the Service Tax paid on outward charges - Appeal allowed.

Summary

Issues:
1. Eligibility of Cenvat Credit on Service Tax paid on outward freight charges under Section 4A of CEA, 1944.
2. Interpretation of "place of removal" for determining eligibility of Cenvat Credit.
3. Comparison of case law precedents regarding Cenvat Credit on outward freight charges.

Analysis:

Issue 1:
The Appellant, a cement manufacturer, cleared cement to distributors and dealers, bearing freight charges till delivery. The Department contended that Cenvat Credit cannot be claimed as per Rule 2(l) of Cenvat Credit Rules, 2004. The Appellant argued that since the freight charges are part of the total cost and form the assessable value based on MRP, they are eligible for Cenvat Credit. The Tribunal allowed the Appeal, citing similar cases where freight was borne by the manufacturer.

Issue 2:
The Department argued that the "place of removal" for Cenvat Credit eligibility is the factory premises, disallowing credit for freight beyond this point. However, the Tribunal held that for goods under Section 4A valuation, the "place of removal" provision does not apply, as per the definition under Section 4 of the Central Excise Act, 1944. This distinction allowed the Appellant to claim Cenvat Credit under Section 4A.

Issue 3:
The Appellant relied on precedents like M/s. Sanghi Industries Ltd. and M/s. Ultratech Cement Ltd., where Cenvat Credit on outward freight charges was allowed when the manufacturer bore the freight cost till delivery. The Tribunal found these cases applicable, emphasizing that the ownership of goods remained with the manufacturer till delivery, making them eligible for Cenvat Credit. Additionally, the Tribunal distinguished the case law cited by the Department, stating it was not relevant to the present circumstances.

In conclusion, the Tribunal allowed the Appeal, stating that the Appellant, governed by Section 4A valuation, cannot be denied Cenvat Credit on Service Tax paid on outward charges. The decision was based on the interpretation of "place of removal" and the distinction between Section 4 and Section 4A goods.