2019 (11) TMI 1050 - AT - Central Excise

CENVAT Credit - input services - outward freight for transporting finished goods from the factory to the buyers 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 - HELD THAT - In view of the decision of the Madras High Court in the case of BATA INDIA LIMITED, HOSUR VERSUS THE COMMISSIONER OF CUSTOMS, CENTRAL EXCISE AND SERVICE TAX, CHENNAI-III 2019 (3) TMI 519 - MADRAS HIGH COURT and also in view of the Board Circular No. 1065/4/2018-CX dated 08/06/2018, the matter needs to be remanded to the original authority to verify certain factual aspects such as whether the sale is on FOR basis, whether the freight is integral part of the sale price, whether the duty paid on the value inclusive of freight amount etc. The matter is remanded back to the original authority to pass a fresh order after examining the various documents for the disputed period - appeal allowed by way of remand.

Summary

Issues:
- Eligibility for cenvat credit on service tax paid on outward freight
- Interpretation of 'place of removal' for availing input service credit
- Sustainability of impugned order passed by the Commissioner (Appeals)

Eligibility for cenvat credit on service tax paid on outward freight:
The appellant, engaged in manufacturing CNC Machines, special purpose machines, and milling machines, had availed input service credit on the service tax paid on outward freight for transporting finished goods. The Department contended that since the factory gate is the 'place of removal' for the goods, the outward freight beyond the factory gate did not qualify as an 'input service.' A show-cause notice was issued demanding the recovery of the wrongly availed cenvat credit. The original authority confirmed the demand, imposed interest, and penalty under relevant rules. The appellant argued that they were eligible for cenvat credit up to the customer's premises, citing legal definitions and precedents supporting their position.

Interpretation of 'place of removal' for availing input service credit:
The appellant's counsel argued that if goods are not sold at the factory gate but at another location after clearance from the factory, that location should be considered the 'place of removal.' Referring to legal provisions and decisions, the counsel contended that if possession of goods is transferred to buyers at their premises, then the goods should be deemed sold at the buyer's location. The appellant relied on various judgments to support their interpretation of the 'place of removal' for availing cenvat credit on service tax paid on transportation.

Sustainability of impugned order passed by the Commissioner (Appeals):
The impugned order passed by the Commissioner (Appeals) rejecting the appellant's appeal was challenged on grounds of not properly appreciating the facts and the law. The appellant argued that they were entitled to cenvat credit based on legal provisions and precedents. The learned AR defended the impugned order, citing a Supreme Court decision and Circular issued by the Board. The Tribunal, after considering submissions and relevant judgments, remanded the case back to the original authority to examine factual aspects like the nature of sale, inclusion of freight in sale price, and duty payment. The Tribunal allowed the appeal by way of remand, considering the legal interpretations and Circular issued by the Board.

This detailed analysis covers the issues of eligibility for cenvat credit on service tax paid on outward freight, interpretation of the 'place of removal' for availing input service credit, and the sustainability of the impugned order passed by the Commissioner (Appeals) in light of legal provisions, arguments presented, and relevant precedents cited during the proceedings.