2024 (2) TMI 250 - AT - Central Excise

CENVAT Credit - Input service or not - availing outward transportation service from GTA to transport the goods from the factory to customer s premises - reverse charge mechanism - inclusion of the cost of transportation in the assessable value of the goods cleared by the Appellant - time limitation. CENVAT Credit - Input service or not - availing outward transportation service from GTA to transport the goods from the factory to customer s premises - reverse charge mechanism - HELD THAT - From the definition of input service it can be seen that prior to 1.4.2008, in sub-clause (ii) any service used by the manufacturer whether directly or indirectly, in or in relation to the manufacture of final products and clearance of final products from the place of removal, is covered under the definition of input service. However, post 01.04.2008, only those services which are used upto the place of removal were covered within ambit of input services. The period involved in the present appeal is prior to 01.04.2008. The issue is considered by various judgements, which are discussed hereunder, which clearly hold that, prior to 01.04.2008, the outward transportation services were specifically covered by main body of the definition of input service, which provides for means part of the definition and it is not necessary to examine the inclusive part of the definition of input services. The Hon ble Apex Court in COMMISSIONER OF CUSTOMS CENTRAL EXCISE AND SERVICE TAX, GUNTUR VERSUS M/S. THE ANDHRA SUGARS LTD. 2018 (2) TMI 285 - SUPREME COURT , in paragraph 8 clearly holds that once it is accepted that the place of removal is the factory premises of the assesee, the outward transportation from the said place would clearly amount to input services. That place can be warehouse of the manufacturer or it can be customer s place if from the place of removal the goods are directly dispatched to the place of the customer. One such outbound transportation from the place of removal gets covered by the definition of input service. - the Appellant is entitled to CENVAT credit of service tax paid under RCM for transportation of goods from its factory to customer s premises. No case is made out by the revenue for denial of the CENVAT Credit on the ground that goods were not sold on FOR basis. Inclusion of the cost of transportation in the assessable value of the goods cleared by the Appellant - HELD THAT - This very issue was considered by the Larger Bench s in the case of ABB LTD. VERSUS COMMISSIONER OF C. EX. ST., BANGALORE 2009 (5) TMI 48 - CESTAT, BANGALORE-LB , which was ultimately upheld by the Hon ble Supreme Court in case of COMMISSIONER OF CENTRAL EXCISE, BELGAUM VERSUS M/S. VASAVADATTA CEMENTS LTD. 2018 (3) TMI 993 - SUPREME COURT , and in which it is held that cenvat credit on outward transportation allowable - Following the decision of the larger bench in ABB Limited, it is held that non-inclusion of the costs of the transportation in assessable value is no ground to deny the CENVAT credit. Time Limitation - HELD THAT - The demand in the present case relates to the period January, 2005 to June, 2007 and the show cause notice was issued on 02.12.2009. The entire demand is beyond normal period of one year. The issue involved is of interpretation of Cenvat Credit Rules and on this issue there are number of judgements. In these circumstances it cannot be said that the Appellant had a mala fide intention to evade the excise duty by taking the wrong credit - there are no suppression of fact or misstatement on the part of the Appellant. Thus, the extended period cannot apply in the facts of the present case. The impugned order set aside both on merits and on limitation - appeal allowed.

Summary

Issues Involved:
1. Admissibility of CENVAT credit on Goods Transport Agency (GTA) services for outward transportation.
2. Inclusion of transportation cost in the assessable value of goods.
3. Applicability of the extended period for demand.

Summary:

1. Admissibility of CENVAT credit on GTA services for outward transportation:
The Appellant, a manufacturer of transformer oil and aluminum conductor, availed GTA services for transporting goods from the factory to the customer's premises and paid service tax under the Reverse Charge Mechanism (RCM). The Appellant reversed the credit under protest due to ambiguity regarding its admissibility. A show cause notice dated 02.12.2009 demanded the wrongly availed CENVAT credit for the period January 2005 to June 2007, which was confirmed by the adjudicating authority and upheld by the Commissioner (Appeals). The Tribunal, in its previous order dated 06.01.2020, remanded the case for fresh adjudication, which again resulted in denial of the credit. The present appeal challenges this order.

The Appellant argued that the GTA services for outward transportation qualify as 'input service' and cited various judgments, including those of the Supreme Court and High Courts, which allowed CENVAT credit on outward transportation services prior to the amendment of Rule 2(l) of CCR in March 2008. The Tribunal agreed, noting that prior to 01.04.2008, the definition of 'input service' included services used for clearance of final products from the place of removal. Post-01.04.2008, only services used up to the place of removal were included. The Tribunal referenced several judgments, including Andhra Sugars Limited, Vasavadatta Cements Ltd., and Parth Poly Wooven Pvt. Ltd., which supported the Appellant's position.

2. Inclusion of transportation cost in the assessable value of goods:
The adjudicating and appellate authorities denied the CENVAT credit on the grounds that the sale was at the factory gate and the transportation cost was not included in the excise duty-paid price. However, the Tribunal, following the Larger Bench decision in ABB Limited, held that the non-inclusion of transportation costs in the assessable value does not disqualify the CENVAT credit. The Tribunal cited the Supreme Court's affirmation of this principle in Vasavadatta Cements Ltd., emphasizing that credit is admissible regardless of whether the transportation cost is included in the transaction value.

3. Applicability of the extended period for demand:
The demand related to the period January 2005 to June 2007, with the show cause notice issued on 02.12.2009, falling beyond the normal period of one year. The Tribunal found that the issue involved interpretation of CENVAT Credit Rules, with multiple judgments on the matter. It ruled that there was no mala fide intention or suppression of facts by the Appellant, thus the extended period could not apply.

Conclusion:
The Tribunal set aside the impugned order on both merits and limitation grounds, allowing the appeal with consequential relief. The judgment was pronounced in open court on 05.02.2024.