2024 (11) TMI 719 - AT - Central Excise

CENVAT in respect of service tax paid on outward transportation under reverse charge mechanism in the admitted fact that the sale of excisable goods is on FOR basis - HELD THAT - It is admitted fact even by the adjudicating authority in the impugned order that the sale of excisable goods is on FOR basis and in respect of supply of such excisable goods the appellant have availed the service of transportation on which the appellant have paid the service tax which has been availed as Cenvat Credit. On the identical facts, this Tribunal has decided the matter in favour of the assessee in the case of M/S ULTRA TECH CEMENT LTD. VERSUS CCE ST, ROHTAK 2014 (10) TMI 679 - CESTAT NEW DELHI . In the said judgment, in the case of sale of goods on FOR basis,whenthe freight is integral part of the assessable value on which excise duty was paid, it was held that in this condition the assessee is eligible for the Cenvat Credit on outward transportation. Recently, on the identical issue and under the same set of facts, the Hon ble Kerala High Court in the case of TRANSFORMERS AND ELECTRICALS KERALA LTD. VERSUS THE COMMISSIONER OF CENTRAL TAX AND CENTRAL EXCISE KOCHI, THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL, BANGALORE. 2024 (10) TMI 623 - KERALA HIGH COURT also taken the same view and held that ' In the instant cases, however, we find that it is the admitted case that the appellant did not include the transportation costs in the assessable value of the goods for the purposes of payment of Central Excise duty. Under such circumstances, we fail to see how the appellant can claim input tax credit in respect of the transportation services availed by it for the purposes of transporting the goods from the place of removal to the buyer's premises. In our view, permitting the appellant to avail input tax credit in such circumstances would militate against the very Scheme of CENVAT credit, which is designed to avoid the cascading effect of tax and an ultimate burden on a consumer. We therefore see no reason to interfere with the order of the Tribunal impugned in these appeals.' In view of the above judgments of the Hon ble High Court of Gujarat and Kerala High Court, the issue is no longer res-integra. Hence, applying the above judgments in the present case also, the appellant is eligible for Cenvat Credit on outward GTA service. The impugned order is set aside, the appeal is allowed with consequential relief.

Summary

Issues Involved:

1. Entitlement of the appellant to Cenvat Credit on service tax paid for outward transportation under the reverse charge mechanism when the sale of excisable goods is on FOR (Free on Rail/Road) basis.

Issue-wise Detailed Analysis:

1. Entitlement to Cenvat Credit on Outward Transportation:

The primary issue in this case revolves around whether the appellant is entitled to Cenvat Credit for service tax paid on outward transportation services under the reverse charge mechanism, given that the sale of excisable goods is conducted on an FOR basis. The appellant argued that in a similar case, Ultra Tech Cement Ltd, the Tribunal had allowed Cenvat Credit where the sale was on an FOR basis, and this decision was upheld by the Hon'ble High Court of Gujarat. The appellant sought a similar disposition for their case.

The Tribunal examined the facts and noted that the sale of goods on an FOR basis implies that the freight is an integral part of the assessable value on which excise duty is paid. Therefore, under these conditions, the assessee is eligible for Cenvat Credit on outward transportation. This position was supported by the precedent set in the Ultra Tech Cement Ltd case, which was affirmed by the Gujarat High Court.

The Tribunal further referenced the Supreme Court's decision in the case of CCE vs. Roofit Industries Ltd, which clarified that when the sale is completed at the buyer's doorstep, the point of sale is the buyer's location, and costs incurred up to that point, including freight, are part of the assessable value for excise duty purposes. Thus, the appellant is entitled to claim Cenvat Credit for service tax paid on outward freight.

2. Application of Precedents and Circulars:

The Tribunal considered relevant circulars and judgments, including the CBEC Circular No. 1065/4/2018-CX, which clarified that the 'place of removal' should be determined with reference to the point of sale. The Tribunal noted that where goods are sold on an FOR basis, and the seller bears the risk and cost of transportation until delivery, the freight charges qualify as 'Input Service.'

The Tribunal also addressed the appellant's contention regarding the excise duty paid on freight being more than the Cenvat Credit on outward GTA, deeming it unnecessary to address since the issue was resolved on the merits of the Cenvat Credit Rules.

3. Limitation and Retrospective Withdrawal of Circulars:

The Tribunal found that the issue was not free from doubt, given the history of litigation on outward GTA under the Cenvat Scheme. It concluded that no malafide intention could be attributed to the appellant, thus, demands for an extended period were unsustainable due to time bar.

Additionally, the Tribunal acknowledged the appellant's reliance on circulars operative at the relevant time, emphasizing that beneficial circulars cannot be withdrawn retrospectively. Therefore, the appellant was entitled to the benefits of these circulars during the material period.

4. Judgment and Conclusion:

In conclusion, the Tribunal set aside the impugned order and allowed the appeal, granting the appellant eligibility for Cenvat Credit on service tax paid for outward transportation. The Tribunal's decision was consistent with the judgments of the Hon'ble High Courts of Gujarat and Kerala, which had addressed similar issues, reinforcing that the matter was no longer res-integra. The appeal was allowed with consequential reliefs, if any.