2010 (4) TMI 322 - AT - Service Tax

Cenvat Credit Input Services Cenvat Credit on (GTA) outward transportation of finished goods place of removal sale of FOR basis Held that - , if as claimed by the Appellant, their sales are on FOR destination basis and the three conditions in this regard mentioned in the Board s Circular dated 23-8-07 are satisfied, that is, ownership and property in the goods remains with the appellant till delivery of the goods in acceptable condition to the customers at their door steps, the Appellant bear the risk of loss or damage to goods during transit upto the destination and freight charges are integral part of the price of the goods, the GTA service availed for transportation of the goods up to the customer s door steps would be covered by definition of input service and would be eligible for Cenvat credit

Issues Involved:
1. Short payment of education cess.
2. Eligibility of Cenvat credit of service tax on GTA services for outward transportation of finished goods.
3. Imposition of penalties under Central Excise Rules and Cenvat Credit Rules.

Detailed Analysis:

1. Short Payment of Education Cess:
The Appellant was found to have short-paid education cess amounting to Rs. 3,58,717/-, out of which Rs. 2,54,805/- was paid immediately. The Department issued a show cause notice for recovery of the short-paid amount along with interest and imposition of penalties. The Commissioner confirmed the demand and imposed penalties. The Appellant argued that the short payment was due to a computational mistake and that the demand was time-barred since the ER-1 returns were filed regularly. The Tribunal noted that the Commissioner did not provide a basis for accusing the Appellant of willful misstatement or suppression of facts. The matter was remanded to the Commissioner to examine the issue of limitation in light of relevant Supreme Court judgments.

2. Eligibility of Cenvat Credit on GTA Services:
The main dispute centered on whether the Appellant was eligible for Cenvat credit of service tax paid on GTA services for outward transportation of finished goods from the factory gate to the customer's premises or depots. The Department contended that such services were not covered under the definition of "input service" as per Rule 2(l) of the CCR, 2004. The Appellant argued that since their sales were on an FOR destination basis, the customer's premises should be treated as the "place of removal," making the transportation services eligible for credit. The Tribunal considered various judgments and Board Circulars, concluding that if the sales were indeed on an FOR destination basis, satisfying specific conditions, the GTA services would be covered under "input service." The matter was remanded to the Commissioner to verify if the sales were on an FOR destination basis and to allow Cenvat credit accordingly.

3. Imposition of Penalties:
The Commissioner had imposed penalties under Rule 25(1) of the Central Excise Rules, 2002, read with Section 11AC of the Excise Act, and under Rule 15 of the CCR, 2004, read with Section 11AC of the Excise Act. The Appellant argued that there was no suppression of facts and that the extended period for recovery could not be invoked. The Tribunal did not provide a separate analysis for the penalties but remanded the matter to the Commissioner for a fresh adjudication, which would implicitly include a re-examination of the penalties based on the findings regarding the eligibility of Cenvat credit and the short payment of education cess.

Conclusion:
The Tribunal set aside the impugned order and remanded the matter to the Commissioner for de novo adjudication. The Commissioner was directed to:
1. Examine the eligibility of Cenvat credit for GTA services based on whether the sales were on an FOR destination basis.
2. Reassess the issue of limitation concerning the short payment of education cess.
3. Implicitly reconsider the imposition of penalties based on the revised findings.

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