2016 (7) TMI 594 - AT - Central Excise

Cenvat credit of service tax availed on freight on outward transportation of goods denied - Held that - Ownership in goods rests with appellant till delivery to customer. The appellants have also furnished a certificate issued by Chartered Accountant wherein it is certified that freight is included in price of goods and form integral part of assessable value. That appellant has paid appropriate duty of excise payable when calculated by including freight in the assessable value, in case of sales made on FOR basis. These documents sufficiently establish that sale was on FOR basis, and freight was borne by appellant. The Board Circular No. 97/8/2007-ST dated 23.08.2007 lays down three conditions to be satisfied to avail credit of outward transportation on FOR basis. As find that all three conditions are satisfied. The Hon ble High Court in the case of CCE & Cus Vs Parth Poly Wooven (P) Ltd., 2011 (4) TMI 975 - GUJARAT HIGH COURT referring to this Circular held that outward transportation is an input service and is eligible for credit. Following the judgment in the above case and applying the same to the facts presented before me, I hold that denial of credit is not legal or proper. - Decided in favour of assessee.

Summary

Issues: Denial of Cenvat credit on service tax for outward transportation of goods.

Analysis:
1. Issue of Denial of Cenvat Credit: The appellant, a cement manufacturer, was denied Cenvat credit on service tax for outward transportation of goods. The department contended that the buyer's place could not be considered as the place of removal, as the transportation was on Free On Road (FOR) basis. The department argued that outward transportation to the customer's premises, even on FOR basis, did not qualify as an input service.

2. Show Cause Notice and Appeal: A show cause notice was issued to the appellant, leading to the confirmation of the demand, interest, and penalty by the original authority. The Commissioner (Appeals) upheld the demand and interest but reduced the penalty. Subsequently, the appellant approached the Tribunal challenging the decision.

3. Appellant's Arguments: The appellant's Chartered Accountant highlighted various documents to support their case. Purchase orders indicated that the price was inclusive of all taxes and transportation up to the site on FOR basis. Invoices reflected that only the amount as per the purchase order was recovered without separate freight charges. An agreement with the transporter emphasized the appellant's ownership of goods until delivery to the customer. Additionally, a certificate by a Chartered Accountant certified that freight was included in the price of goods.

4. Legal Precedents and Circular: The Board Circular No. 97/8/2007-ST outlined three conditions for availing credit of outward transportation on FOR basis. The Tribunal referred to a High Court judgment in CCE & Cus Vs Parth Poly Wooven (P) Ltd., which held that outward transportation is an input service eligible for credit. Relying on this precedent and the presented facts, the Tribunal concluded that the denial of credit was unjustified.

5. Tribunal's Decision: The Tribunal found that all three conditions from the circular were met and that the denial of credit was not legally sound. Consequently, the impugned order was set aside, and the appeal was allowed with any necessary consequential reliefs. The operative part of the order was pronounced at the conclusion of the hearing.