2021 (5) TMI 458 - HC - Central Excise

Recovery of CENVAT Credit - outward transportation of final goods from the factory of the appellant to the customer s premises - Whether the Appellate Tribunal is justified in not considering the Circular bearing No.1065/4/2018-CD, dated 08.6.2018? - HELD THAT - The aspect of non-consideration of the impact of the Circular, dated 08.6.2018, is fatal to the order passed by the Appellate Tribunal. In the considered opinion of this Court, the matter requires reconsideration by the Appellate Tribunal after taking into account, the impact and effect of Circular bearing No.1065/4/2018-CD, dated 08.06.2018, having regard to the contents of the paragraphs Nos.3 and 4 of the said circular as indicated in the preceding paragraphs. Appeal allowed by way of remand.

Summary

Issues:
1. Whether the appellant wrongly availed Cenvat credit on outward transportation of final goods?
2. Whether the Appellate Tribunal failed to consider the impact of Circular No. 1065/4/2018-CD in the case?

Analysis:
1. The appellant, engaged in cement manufacturing, availed Cenvat credit on outward transportation of goods. The authorities alleged that this credit was wrongly taken as the transportation was beyond the place of removal, i.e., factory gate. The order confirmed the demand stating that the transportation service did not qualify as an input service under Rule 2(1) of the Credit Rules. The appellant argued that for FOR sales, where they bear freight charges till goods reach the customer, the service tax paid on such transportation should be admissible as credit. The order held that outward transportation from the factory cannot be treated as an input service since credit is restricted up to the place of removal, not from it.

2. The appellant challenged the orders before the Appellate Tribunal, which dismissed the appeal. The High Court examined the non-consideration of Circular No. 1065/4/2018-CD by the Tribunal. The Circular clarified the determination of the place of removal, emphasizing the point of sale with reference to the manufacturer's premises. Exceptions were noted for FOR contracts where ownership and risk remain with the seller until delivery. The appellant contended that the Tribunal failed to assess the impact of the Circular on their claim, which the Court deemed fatal to the Tribunal's order. The Court allowed the appeal, setting aside the Tribunal's order, and remanded the matter for fresh consideration, directing the Tribunal to review the Circular and provide a new decision after hearing the appellant.

This detailed analysis highlights the key legal issues, arguments presented, and the Court's reasoning in the judgment, ensuring a comprehensive understanding of the case.