2014 (8) TMI 788 - HC - Service Tax

Cenvat credit - input services - Goods Transport Agency service - whether the Cenvat credit taken for the period April 2008 to March, 2009 be reversed and penalty alongwith interest be imposed - Invocation of extended period of limitation - service tax paid on the transport service from the gate of the factory upto the premises of the consumer - Held that - In pursuance of the aforesaid powers, the central government has framed Cenvat Credit Rules, 2004 (the Rules). The Rules provide for a procedure for taking credit of the excise duty paid on input goods as well as on input service. Rule 2(l) of the Rules provides input services to mean, apart from other things, the service used by the manufacturer for clearance of the final product upto the place of removal. It further clarifies that input service includes an outward transportation upto the place of removal - There is no provision in the Act or in the Rules or in any circular issued by the Board of Central Excise and Customs, New Delhi (the Board) to hold that in case the duty is charged on the specified rate, then the place of removal will be factory gate. The matter is sent back to the Commissioner-Raipur to re-determine the question as to what is the place of removal whether it is factory gate of the Assessee; or it is the premises of the consumer. In case it is held that the place of removal is the premises of the consumer, then the Assessee will be entitled to take the Cenvat credit on such service as it will be deemed to be input service - Decided partly in favour of assessee.

Summary

Issues:
1. Determination of the place of removal for excise duty payment.
2. Validity of Cenvat credit on service tax paid to Goods Transport Agency.
3. Interpretation of the Central Excise Act regarding the extended period of limitation for tax cases.

Issue 1: Determination of the place of removal for excise duty payment
The case involved tax cases arising from orders passed by the Tribunal regarding the place of removal for excise duty payment by an Assessee manufacturing cement. The Tribunal held that if excise duty is charged at a specified rate, the place of removal is the factory gate, not the consumer's premises. The High Court disagreed with this presumption, emphasizing that the Act, Rules, and circulars do not define factory gate as the place of removal for specified rate duty payment. The Court cited a previous case (Lafarge case) to highlight the need for a case-by-case determination of the place of removal based on contract terms and sale destination. The matter was remanded to the Commissioner for re-determination, allowing the Assessee to present further evidence if needed.

Issue 2: Validity of Cenvat credit on service tax paid to Goods Transport Agency
The Assessee had availed Cenvat credit for service tax paid to Goods Transport Agency (GTA) for transporting goods to consumers. The Commissioner raised concerns about the eligibility of this credit, leading to show cause notices and subsequent appeals. The Tribunal partially allowed the appeals, highlighting confusion in the law and remanding the matter for re-quantification. The High Court's decision focused on the definition of "input service" under the Cenvat Credit Rules, emphasizing that the place of removal determination impacts the eligibility for such credit. The Court directed the Commissioner to re-determine the place of removal, affecting the Assessee's entitlement to Cenvat credit based on this determination.

Issue 3: Interpretation of the Central Excise Act regarding the extended period of limitation for tax cases
The Department filed a tax case challenging the Tribunal's finding on the extended period of limitation under the Central Excise Act. The Tribunal had ruled in favor of the Assessee, citing confusion in the law and no suppression on the Assessee's part. The High Court upheld the Tribunal's decision, dismissing the Department's tax case and answering the question in favor of the Assessee. The Court emphasized the absence of illegality in the Tribunal's finding and maintained that there was no merit in the Department's case.

In conclusion, the High Court partially allowed the Assessee's tax cases, remanding the determination of the place of removal, dismissed the Department's tax case on the extended period of limitation, and upheld the Tribunal's findings. The judgment clarified the legal interpretation regarding excise duty payment, Cenvat credit eligibility, and the application of the Central Excise Act in tax cases.