2018 (2) TMI 375 - AT - Central Excise

Extended period of limitation - CENVAT credit - input service - outward transportation/freight incurred - Held that - the issue herein is wholly interpretational as held by the learned Commissioner (Appeals) - in several judgments of this Tribunal, it have been held that prior to the amendment in the year 2008, in the definition of input in Rule 2(l) of CCR, Cenvat Credit was available on the outward transportation, wherein the place of removal was the factory gate. The SCN have been issued for the period January, 2005 to August, 2006 on 19 October, 2007 which is clearly beyond 12 months from 10 September, 2006 (date of filing return) - The SCN issued invoking the extended period of limitation is bad and the same is not sustainable - appeal allowed - decided in favor of appellant.

Summary

Issues involved:
Entitlement to Cenvat Credit on outward transportation/freight for finished products.

Analysis:
The appeal revolves around the entitlement of the assessee, engaged in the manufacture of Forging and Flanges, to claim Cenvat Credit on the outward transportation/freight for delivering finished products from the factory gate to the buyer's premises. The appellant contends that they paid the freight, including service tax, and claimed it as input service credit.

The Revenue's argument, based on a show cause notice, is that since the goods were sold at the factory gate, the place of removal being the factory, the outward transportation of goods does not qualify as an input service under Rule 2(l) of the CCR, 2004. According to the Department, Rule 2(l) limits outward transportation credit up to the place of removal only.

The Commissioner (Appeals) interpreted Rule 2(l) differently, stating that input service includes services related to outward transportation from the place of removal. The Commissioner highlighted that while the second clause restricts transport service credit up to the place of removal, reading both clauses together clarifies that transport service credit is eligible up to the place of removal. Additionally, the Commissioner ruled that the penalty under Section 78 was not justified as the issue was a matter of legal interpretation without any malicious intent from the appellant.

Upon reviewing the contentions, the Member (Judicial) found the issue to be interpretational, aligning with the Commissioner's view. Referring to past Tribunal judgments, it was noted that prior to the 2008 amendment in the definition of input in Rule 2(l) of CCR, Cenvat Credit was indeed available on outward transportation when the place of removal was the factory gate. Consequently, the show cause notice issued beyond the 12-month limitation from the filing return date was deemed invalid. The impugned order disallowing Cenvat Credit on outward transport was set aside, entitling the appellant to consequential benefits as per the law.