2015 (8) TMI 1180 - AT - Central Excise

Denial of CENVAT Credit - Determination of place of removal - Inclusion of freight - Held that - High Court of Madras in the cases of CCE, Chennai Vs. M/s. Borg Warner Morse TEC Murugappa Pvt. Ltd. (2015 (4) TMI 254 - MADRAS HIGH COURT), has relied on the decision of the Hon ble Karnataka High Court in the case of CCE, Bangalore Vs. ABB Ltd. 2011 (3) TMI 248 - KARNATAKA HIGH COURT which was rendered on the appeal filed by the Department as against the decision of the Larger Bench of the Tribunal and it was held that whether services availed by the manufacturer of outward transportation of final products from the place of removal should be treated as an input service in terms of Rule 2(l)(ii) of the CENVAT Credit Rules, 2004 and thereby enabling the manufacturer to take credit of the service tax on the value of such services. - in view of the decisions of the Hon ble High Courts, it is clear that CENVAT credit can be availed for the outward transportation upto the place of removal. The Board s Circular has elaborately dealt with the issue of determination of place of removal and as per the terms of the purchase order delivery is upto the place of destination and freight was paid by the appellants, they are eligible for availing input service credit on outward transportation. - Impugned order is set aside - Decided in favour of assessee.

Summary

Issues:
- Eligibility for CENVAT credit on service tax for outward transportation of goods
- Interpretation of Rule 2(l) of the CENVAT Credit Rules, 2004

Eligibility for CENVAT Credit on Outward Transportation:
The case involved M/s. Vijay Cements, engaged in cement manufacturing, disputing a Show Cause Notice denying them CENVAT credit on service tax paid for outward transportation of goods. The appellants argued that the SCN was time-barred and claimed their dispatches were on FOR destination basis, with sales occurring at the customer's place upon delivery. The adjudicating authority upheld the demand and imposed penalties, which the Commissioner (Appeals) affirmed. The appellant cited High Court judgments supporting their claim, emphasizing the definition of input service under Rule 2(l) of the CENVAT Credit Rules, 2004. The Revenue, however, supported the lower authorities' findings, asserting that the Board's Circular did not apply to the case.

Interpretation of Rule 2(l) of the CENVAT Credit Rules, 2004:
The Tribunal examined the decisions of various High Courts, particularly the Hon'ble High Court of Madras, which relied on a Karnataka High Court judgment regarding the treatment of outward transportation as an input service. The Tribunal quoted the Karnataka High Court's detailed explanation of the definition of input service, emphasizing the inclusive nature of Rule 2(l) during the relevant period. The Tribunal ultimately ruled in favor of the appellant, setting aside the Commissioner (Appeals) order and allowing the appeal, granting consequential relief. The judgment clarified that CENVAT credit could be availed for outward transportation up to the place of removal, aligning with the interpretation provided by the High Courts and the inclusive definition of Rule 2(l) of the CENVAT Credit Rules, 2004.

This detailed analysis of the judgment highlights the issues of eligibility for CENVAT credit on service tax for outward transportation of goods and the interpretation of Rule 2(l) of the CENVAT Credit Rules, 2004, providing a comprehensive overview of the case and its legal implications.