2018 (7) TMI 99 - AT - Service Tax

CENVAT Credit - input services - outward freight paid beyond the place of removal - Rule 2(l) of Cenvat Credit Rules, 2004 - time limitation - Held that - The Cenvat Credit on goods transport agencies availed for transport of goods from place of removal to buyer s premises was not admissible to the Appellant - demand upheld. Extended period of limitation - Held that - Vide the impugned Show Cause Notice the demand for refunding the Cenvat Credit already availed by the Appellant for the period with effect from 2011 till 2015 has been claimed. The Show Cause Notice is of January 2016. Apparently, it is beyond the period of one year for the demand till the year 2014 - Since the fact of availment of such irregular credit was not disclosed to the Department, the Commissioner has rightly held it to be a clear case of suppression of relevant facts warranting invocation of extending period and imposition of mandatory penalty under Section 78 - SCN is not time barred. Appeal dismissed - decided against appellant.

Summary

Issues:
1. Admissibility of Cenvat Credit on outward freight services.
2. Applicability of the extended period for demanding refund.

Analysis:

Issue 1: Admissibility of Cenvat Credit on outward freight services:
The core issue in this case pertains to the admissibility of Cenvat Credit on goods transport agency services used for transporting goods from the place of removal to the buyer's premises. The Appellant argued that the definition of input service under Rule 2(l) of Cenvat Credit Rules, 2004 allowed for such credit. However, the Tribunal clarified that an amendment in 2008 replaced the term 'from' with 'upto,' limiting the credit only up to the place of removal. The Tribunal emphasized that once goods are cleared from the factory premises, services related to transportation cannot be considered as used in relation to the manufacture of final products. Citing legal precedents, the Tribunal concluded that post-removal transport of goods does not qualify as an input service for manufacturers. Therefore, the Cenvat Credit claimed by the Appellant for outward transportation was deemed inadmissible, upholding the order disallowing the credit.

Issue 2: Applicability of the extended period for demanding refund:
Regarding the contention that the Show Cause Notice was barred by time, the Tribunal noted that the Department discovered the irregular credit during an audit in September 2015, although the notice was issued in January 2016. The Tribunal held that since the Appellant had not disclosed the irregular credit earlier, it constituted suppression of facts, justifying the Department's invocation of the extended period under Section 78 of the Act. Consequently, the Tribunal upheld the order imposing penalties and directing the Appellant to refund the irregularly availed Cenvat Credit. The Tribunal found no fault in the Commissioner's decision, affirming the necessity for compliance with the order.

In conclusion, the Tribunal ruled against the Appellant on both issues, upholding the disallowance of Cenvat Credit on outward freight services and confirming the applicability of the extended period for demanding refund. The judgment emphasized adherence to the amended rules governing Cenvat Credit eligibility and the consequences of non-disclosure of relevant facts to the tax authorities.