2018 (11) TMI 827 - AT - Central Excise

CENVAT Credit - input service - GTA Service - outward transportation in the case of sale to the customer - place of removal - Held that - Those services are included which are used by the manufacturer, whether directly or indirectly, in or in relation to the manufacture of final products and clearance of final products upto to the place of removal . This definition became effective from 01.03.2008 - prior to the amendment the services used by the manufacturer for clearance of final products from the place of removal even to the customer s place or anywhere else were excisable for cenvat credit. However, after the amendment the position has become absolutely changed, i.e. the benefit which was admissible beyond the place of removal so as to avail the cenvat credit stands redundant. It is only upto the place of removal that the service can be treated as input service whereupon the cenvat credit can be availed. The place of removal is the place from where the finally manufactured product is cleared after payment of excise duty. Thus any expense incurred beyond this point is not to be included in the value as such will not be the input thereby no cenvat credit will be available on any such expense - GTA service being the services beyond the place of removal therefore cannot be considered as the input services. Credit not allowed - appeal dismissed - decided against appellant.

Summary

Issues:
1. Disallowance and recovery of Cenvat Credit for availing service tax paid on GTA Service for transportation of goods beyond the place of removal.

Analysis:
The appeal was directed against an Order of Commissioner (Appeals) dated 24/04/2018, where the Department alleged that the appellants were wrongly taking cenvat credit of service tax paid on GTA Service for transportation of goods beyond the place of removal. A Show Cause Notice (SCN) was issued proposing disallowance and recovery of Cenvat Credit amounting to ?3,87,332/- for the period of December 2014 to October 2015 along with interest and penalty. The Order-in-Original confirmed this proposal, but the amount denied as Cenvat Credit was erroneously mentioned as ?16,29,734/- instead of the proposed amount. The Commissioner (Appeals) upheld these findings, leading to the appeal before the Tribunal.

The appellant contended that the services on which the cenvat credit was availed were directly related to the manufacture of final products and hence, the credit was rightfully availed. They argued that the definition of 'place of removal' now includes freight charges paid by the manufacturer, making the buyer's place the place of removal. The appellant sought to set aside the Order of Commissioner (Appeals) that confirmed the recovery of cenvat credit on GTA services.

In the hearing, the appellant's counsel cited various case laws to support the argument that Transportation Services should be considered as input services for availing cenvat credit. On the other hand, the Department justified the Order by referring to a decision of the Hon'ble Apex Court in a related case and requested the dismissal of the appeal.

The Tribunal deliberated on whether the value of outward transportation in a sale to the customer should be part of the transaction value to entitle the appellant to avail cenvat credit. The definition of input service under the Cenvat Credit Rules, 2004 was examined, emphasizing that services used by the manufacturer for clearance of final products 'upto the place of removal' are eligible for credit. The Tribunal noted that post-removal transport of manufactured goods is not an input for the manufacturer, and credit cannot extend beyond the place of removal.

The Tribunal highlighted that the place of removal is where the finally manufactured product is cleared after payment of excise duty, and any expense incurred beyond this point cannot be included in the value for availing cenvat credit. Therefore, GTA services for transportation beyond the place of removal were deemed ineligible for cenvat credit. The Tribunal upheld the Adjudicating Authority's decision to recover the wrongly availed cenvat credit on GTA services, albeit noting a typographical error in the amount mentioned.

Ultimately, the Tribunal dismissed the appeal, affirming that only services up to the place of removal can be treated as input services for availing cenvat credit, and expenses beyond that point are not eligible for credit.