2015 (5) TMI 20 - AT - Central Excise

Denial of input Cenvat credit on outward transportation services - Goods are being sold on FOR basis - Non Compliance of CBEC circular No. 97/8/07 dated 23.8.07 - Extended period of limitation - Denial on observation during the course of audit - Held that - Considering the fact that in the case of Ambuja Cement Eastern 2010 (4) TMI 429 - CHHAITISGARH HIGH COURT , the Hon'ble High Court held that if the goods are sold on FOR basis, and if the freight is not included in the assessable value and the assessee has not complied with the condition of the CBEC circular No. 97/8/07 dated 23.8.07, the assessee is not entitled to take Cenvat credit on outward transportation service. Therefore, I hold that in this case, appellants are not entitled to take Cenvat credit on outward transportation service as same is not included in the assessable value of the goods in compliance with the CBEC Circular No. 97/8/07 dated 23.8.07. I further find that during the course of arguments, learned advocate for the appellants submits that show cause notice dated 27.3.2012 has been issued by invoking extended period of limitation. As there is no suppression on the part of the appellants, therefore extended period of limitation is not invokable. On this account, I find that availment of Cenvat credit came in the knowledge of department during the course of audit. If Audit would not have been conducted, the availment of inadmissible credit would not be known to the department. In these circumstances, I hold that extended period of limitation is rightly invoked. - Decided against the appellant.

Summary

Issues:
- Denial of input Cenvat credit on outward transportation services
- Interpretation of CBEC circular No. 97/8/07 dated 23.8.07
- Applicability of Cenvat credit on freight charges in case of goods sold on FOR basis
- Invocation of extended period of limitation for issuing show cause notice

Analysis:

The appellants challenged impugned orders denying input Cenvat credit on outward transportation services based on show cause notices issued for different periods. The denial was rooted in the premise that although goods were sold on FOR basis, freight was shown separately in the invoices, leading to the conclusion that Cenvat credit was not permissible as per CBEC circular No. 97/8/07 dated 23.8.07. The adjudicating authority confirmed demands, imposed penalties, and interest, prompting the appeal.

The advocate for the appellants argued that since no duty was payable on freight charges as goods were sold on FOR basis, and Service tax on freight was paid, Cenvat credit on freight charges should be allowed as the goods were to be delivered at the buyers' door. Conversely, the learned AR contended that since freight charges were not part of the assessable value of goods, Cenvat credit for service tax on outward transportation services was not permissible, citing the CBEC circular.

The Tribunal considered the submissions in light of the Ambuja Cement Eastern case precedent where it was established that if goods sold on FOR basis did not include freight in the assessable value and did not comply with CBEC circular No. 97/8/07 dated 23.8.07, Cenvat credit on outward transportation services would not be allowed. Consequently, the Tribunal held that the appellants were not entitled to such credit as per the circular's compliance requirements.

Moreover, the advocate for the appellants raised the issue of the extended period of limitation invoked in the show cause notice dated 27.3.2012. The Tribunal noted that since there was no suppression on the appellants' part, the extended period was deemed inapplicable. However, it was highlighted that the department became aware of the inadmissible credit during an audit, indicating that the extended limitation period was correctly invoked. Consequently, the appeals were dismissed based on these findings.