2021 (5) TMI 741 - HC - Central Excise

Challenge to the Show cause notice (MTC) - CENVAT Credit - transportation charges incurred in transportation of its products from its factories / depots to the customer places - place of removal - extended period of limitation - HELD THAT - After analyzing the materials on record and statements of various officers of the petitioner which were recorded during investigation, it has been observed that CENVAT credit on input services is eligible for outward transportation upto the place of removal. Assessee was not eligible for taking CENVAT credit on the service tax paid on transportation charges incurred for transportation of goods from depots and factories to the place of the customers i.e., beyond the place of removal. Referring to the amendment, it is contended that it is only upto the place of removal that any service appears to have been treated as input service for allowing CENVAT credit thereon. Post amendment, the benefit which was admissible earlier even beyond the place of removal would now get terminated at the place of removal. CENVAT credit cannot travel beyond the point of removal. It would be more appropriate if petitioner responds to the impugned show cause-cum-demand notice by filing reply and thereafter if respondent No.3 is not satisfied with the show cause reply, the matter may be adjudicated by the adjudicating authority - Petition dismissed.

Issues Involved:
1. Legality of the show cause-cum-demand notice dated 09.05.2019.
2. Eligibility of CENVAT credit on outward goods transport agencies (GTA) post-01.03.2008.
3. Applicability of the extended period of limitation under section 11A(4) of the Central Excise Act, 1944.
4. Allegation of suppression of facts by the petitioner.
5. Maintainability of the writ petition.

Detailed Analysis:

1. Legality of the Show Cause-cum-Demand Notice Dated 09.05.2019:
The petitioner sought the quashing of the show cause notice dated 09.05.2019, which demanded recovery of irregular CENVAT credit of ?2,02,30,256.00 for the period from April 2014 to June 2017. The notice was issued under section 11A(4) of the Central Excise Act, 1944, read with Rule 14 of the CENVAT Credit Rules, 2004. The petitioner argued that the notice was contrary to the circular dated 08.06.2018 of the Central Board of Indirect Taxes and Customs, which stated that no new show cause notice should invoke the extended period of limitation in cases where an alternative interpretation was taken by the assessee.

2. Eligibility of CENVAT Credit on Outward Goods Transport Agencies (GTA) Post-01.03.2008:
The petitioner contended that CENVAT credit on outward GTA is eligible even post-01.03.2008. Prior to this date, 'input service' included services used directly or indirectly in the manufacture and clearance of final products from the place of removal. Post-01.03.2008, the definition was amended to restrict 'input service' to services used up to the place of removal. The petitioner argued that despite this amendment, CENVAT credit on transportation charges from factories/depots to customer places remained eligible, supported by several Supreme Court decisions.

3. Applicability of the Extended Period of Limitation under Section 11A(4) of the Central Excise Act, 1944:
The respondent invoked the extended period of limitation under section 11A(4) on the grounds of alleged mala fide intent and fraudulent contravention of statutory provisions by the petitioner. The petitioner countered that the allegation of suppression of facts was incorrect, and thus, the extended period of limitation should not apply. The petitioner referred to the circular dated 08.06.2018, which advised against invoking the extended period of limitation for alternative interpretations by the assessee.

4. Allegation of Suppression of Facts by the Petitioner:
The respondent alleged that the petitioner intentionally suppressed the fact of taking CENVAT credit on outward GTA services with mala fide intent. The petitioner denied this, stating that the allegation was misplaced and incorrect. The respondent argued that without the investigation, the ineligible CENVAT credit would not have been discovered, justifying the invocation of section 11A(4).

5. Maintainability of the Writ Petition:
The respondent questioned the maintainability of the writ petition, suggesting that the petitioner should respond to the show cause notice through the adjudication process. The adjudication process is quasi-judicial, providing the petitioner with a full opportunity to be heard. The Gujarat High Court had previously dismissed a similar writ petition by the petitioner, granting liberty to file a reply to the show cause notice. The court concurred that adjudication on the show cause-cum-demand notice would involve dealing with various factual issues, making the writ court an inappropriate forum for such matters.

Conclusion:
The court dismissed the writ petition, directing the petitioner to file a reply to the show cause-cum-demand notice within 30 days. The court clarified that it had not expressed any opinion on the merits and kept all contentions open. The court emphasized that the adjudicating authority should address the jurisdictional facts before issuing the show cause-cum-demand notice. The petitioner was granted additional time to respond due to the pending status of the case before the court.

← Previous Next →