2019 (5) TMI 1618 - AT - Central Excise

CENVAT Credit - input services - outward freight incurred on finished goods dispatched by them to their buyers / consignment agents on FOR basis - Place of removal - Rule 2(l)(ii) of Cenvat Credit Rules, 2004 - HELD THAT - It is admitted fact that the appellant has sold the goods on FOR basis and such price includes the cost of freight upto the customers premises. Further, in the facts and circumstances, till the time the customer has accepted the goods at his doorstep, the appellant was liable for risk in transit - the place of removal was the doorstep of the customer and accordingly as provided in Rule 2(l) of the Cenvat Credit Rules, 2004, the appellant is entitled to cenvat credit on outward freight, till the place of removal. Credit allowed - appeal allowed - decided in favor of appellant.

Summary

Issues:
- Entitlement to cenvat credit on outward freight for lubricating oil manufacturing
- Interpretation of place of removal for cenvat credit eligibility
- Application of divergent views by different High Courts and Supreme Court benches on place of removal
- Impact of Circular No. 1065/4/2018-CX on determining place of removal
- Consideration of precedent judgments and circulars for cenvat credit eligibility on outward freight

Entitlement to Cenvat Credit on Outward Freight:
The appeal revolved around the entitlement of the appellant, engaged in manufacturing lubricating oil, to cenvat credit on outward freight incurred on finished goods dispatched to buyers/consignment agents on FOR basis. The Revenue contended that the service tax paid on outward freight did not qualify as an input service under Rule 2(l)(ii) of the Cenvat Credit Rules, 2004.

Interpretation of Place of Removal:
The central issue was the determination of the place of removal for cenvat credit eligibility on outward freight. The Commissioner (Appeals) allowed cenvat credit on inward transportation for inputs and outward transportation up to the sales depot, reducing the penalty proportionately. The appellant argued that the place of removal should be considered the customer's doorstep, where goods were handed over and the cost of freight borne by the manufacturer seller.

Divergent Views on Place of Removal:
The appellant highlighted divergent views by different High Courts and Supreme Court benches regarding the place of removal. While one Supreme Court bench held that the manufacturer's premises should be the place of removal, other benches considered the place of removal as the customer's doorstep in FOR destination sales.

Impact of Circular No. 1065/4/2018-CX:
The appellant referenced Circular No. 1065/4/2018-CX, which clarified the determination of the place of removal based on the Supreme Court's principle in a specific case. The circular emphasized that the place of removal should generally be the premises of the manufacturer, aligning with the principle laid down in a specific Supreme Court case.

Consideration of Precedent Judgments and Circulars:
The Tribunal considered a precedent where the point of sale was deemed the customer's doorstep, making the manufacturer seller liable for outward transportation costs. The Tribunal held that under the circumstances, the manufacturer seller was entitled to cenvat credit on outward freight, and the extended period of limitation was not available to the Revenue.

In conclusion, the Tribunal allowed the appeal, granting the appellant cenvat credit on outward freight until the customer's doorstep, modifying the impugned order accordingly. The question of limitation was left open for further consideration.