2023 (12) TMI 176 - AT - Service Tax

CENVAT Credit - input service - interpretation of Rule 2 (l) of the Cenvat Credit Rules, 2004 - place of removal - HELD THAT - Rule 2 (l) provides that the input service is the services used directly or in-directly, in or in relation to manufacture and clearance of the finished products up to the place of removal. Undisputedly, the place of removal in the present case is the direct shop in Kolkata and the claim of appellant that the duty is paid on the value determined on the basis of sale value from the direct shop is not disputed in the impugned order. Interestingly, Commissioner (Appeals) says in his order that adjudicating authority in his earlier order states that direct shop at Kolkata belongs to M/s Frostees Export India Pvt. Ltd. and for that reason it cannot be place of removal while doing so Commissioner (Appeals) has failed to examine the basic question whether the goods were sold by the appellant from the direct shop which may be owned by M/s Frostees Export India Pvt. Ltd. or any other person. Once it is established that the appellant were paying duty on the value at which the bikes were sold from the direct shop at Kolkata then there cannot be any reason for not allowing the Cenvat Credit in respect of the services received at depot. Thus, there is no justification for holding that the direct shop at Kolkata from where the bikes were finally sold by the appellant is not the place of removal as per Rule 2 (qa) of the CENVAT Credit Rules, 2004 - the expenses incurred on rent, repair and maintenance of the direct shop cannot be excluded from the assessable value for the payment of Central Excise Duty and for the same reason the service tax paid in respect of these services received at depot cannot be denied. There is no justification for not allowing the credit in respect of input services received at the direct shop in Kolkata from where the goods are finally sold by the appellant after clearance from the factory. There is no merit in the impugned order and the same is set aside. As the demand for duty is set aside the demand for interest and penalty imposed is also set aside - Appeal allowed.

Issues Involved:
1. Interpretation of "place of removal" under Rule 2(l) of the Cenvat Credit Rules, 2004.
2. Eligibility of Cenvat Credit on rent, repair, and maintenance services for the direct shop.
3. Determination of assessable value and inclusion of expenses incurred at the place of removal.
4. Applicability of interest and penalties under Section 11AA, 11AB, and 11AC of the Central Excise Act, 1944.

Summary:

1. Interpretation of "place of removal" under Rule 2(l) of the Cenvat Credit Rules, 2004:
The Tribunal examined Rule 2(l) of the Cenvat Credit Rules, 2004, which defines "input service" to include services used by a manufacturer in relation to the manufacture and clearance of final products up to the place of removal. The definition of "place of removal" under Section 4(3)(c) of the Central Excise Act, 1944, includes a factory, warehouse, depot, or any other place from where excisable goods are sold after clearance from the factory. The Tribunal concluded that the direct shop in Kolkata qualifies as the place of removal as per Rule 2(qa) of the Cenvat Credit Rules, 2004.

2. Eligibility of Cenvat Credit on rent, repair, and maintenance services for the direct shop:
The appellant argued that the direct shop in Kolkata is the place of removal where the final product is sold, and hence, the expenses incurred on rent, repair, and maintenance should be included in the assessable value for duty payment. The Tribunal noted that the appellant was paying duty based on the sale value from the direct shop and not a notional value at the factory gate. Therefore, the Tribunal held that the service tax paid on these services should be allowed as Cenvat Credit.

3. Determination of assessable value and inclusion of expenses incurred at the place of removal:
The Tribunal referred to various judgments, including Prabhat Zarda Factory Ltd. and Metro Shoes Pvt. Ltd., which established that the value for duty payment should be determined at the place of removal. The Tribunal emphasized that expenses incurred at the direct shop, such as rent, repair, and maintenance, form part of the assessable value and should be included for duty payment. Consequently, the service tax paid on these services is eligible for Cenvat Credit.

4. Applicability of interest and penalties under Section 11AA, 11AB, and 11AC of the Central Excise Act, 1944:
The Tribunal found that there was no suppression of facts by the appellant and that the issue involved was an interpretation of law. Therefore, the Tribunal set aside the demand for interest and penalties, holding that the appellant had taken the credit under a bona fide belief.

Conclusion:
The Tribunal allowed the appeal, setting aside the impugned order and holding that the direct shop in Kolkata is the place of removal. Consequently, the expenses incurred on rent, repair, and maintenance of the direct shop are part of the assessable value, and the service tax paid on these services is eligible for Cenvat Credit. The demands for interest and penalties were also set aside.

← Previous Next →