2019 (1) TMI 56 - AT - Central Excise

CENVAT Credit - input service - outward freight for transporting finished goods from the factory to the buyer s premises - place of removal - Department alleged that since the factory gate is the place of removal for the goods cleared by the assessee and the outward freight which is used for clearance of final products beyond the factory gate did not fall within the purview of definition of input service as per Rule 2(l) of CCR, 2004 - Held that - In the present case as per the purchase orders, the appellant is supposed to supply the goods at the buyer s premises and the price of the goods include outward freight - the various circular issued by the Board in the year 2007, 2014 clearly show that evidences of the parties is to be ascertained as to when the property in the goods passes along with the other documents i.e. purchase order, invoices etc. - there is no infirmity in the impugned order demanding the cenvat credit wrongly availed by the appellant. Extended period of limitation - penalty - Held that - There were divergent views during the period in dispute on the issue, therefore the allegation of suppression with intent to evade payment of duty is not sustainable - the demand beyond the normal period of limitation is set aside as there was no intention to evade payment of duty - the penalties imposed on the appellant are also not sustainable and hence set aside. The impugned orders in respect of the demand for the normal period with interest is upheld and penalties are set aside - appeal allowed in part.

Summary

Issues Involved:
- Incorrect availing of input service credit on outward freight
- Rejection of appeals by Commissioner (Appeals)
- Interpretation of 'place of removal' for goods clearance
- Applicability of cenvat credit on Goods Transport Agency Service
- Validity of penalties imposed

Analysis:
The case involved three appeals against a common impugned order where the appellants, engaged in manufacturing machines, were found to have wrongly availed input service credit on outward freight for transporting goods. The Department alleged irregularity in availing this credit as the outward freight did not fall within the definition of 'input service.' Show-cause notices were issued for different periods demanding recovery of wrongly availed cenvat credit along with penalties. The original authority confirmed the demand and penalties, which were upheld by the Commissioner, leading to the appeals.

The appellant argued that the place of removal was the buyer's premises, not the factory gate, making the outward freight eligible for credit. They cited various decisions supporting their position and highlighted circulars clarifying the determination of the place of sale for availing cenvat credit on Goods Transport Agency services. However, the Department contended that recent Supreme Court judgments, including the Ultra Tech Cement case, disallowed cenvat credit on such services.

After considering both parties' submissions and the relevant material, the Tribunal found that the appellant was supposed to supply goods at the buyer's premises, including outward freight in the price. The Tribunal referenced the Ultra Tech Cement case and held that the appellant was not entitled to the cenvat credit on the outward freight. The Tribunal emphasized that subsequent circulars could not override the Apex Court's judgment. Regarding penalties and the extended limitation period, the Tribunal noted the divergent views during the disputed period and concluded that there was no intention to evade payment of duty, setting aside the penalties and demand beyond the normal limitation period.

In conclusion, the Tribunal upheld the demand for the normal period with interest but set aside the penalties imposed on the appellant. The judgment was pronounced in open court on 31/12/2018.