2024 (3) TMI 3 - AT - Central Excise

CENVAT Credit - freight charges incurred from their factory premises to the factory premises of the buyer - place of removal - extended period of limitation - suppression of facts or not - HELD THAT - In this particular case, without doubt the place of removal is the factory premises of the Appellant only. Therefore, if the party has failed to claim any abatement on account of the freight charges incurred by them from their factory premises to premises of the receiver of the goods, the same cannot be come to the rescue in respect of the Cenvat Credit to be taken. Rule 2 (l) of the Cenvat Credit Rules, 2004, is very clear that the Cenvat Credit can be taken for the services utilized upto the place of removal only. Therefore, there are no merits in the Appeal filed by the Appellant. Suppression of facts - HELD THAT - Admittedly, they have been paying the Service Tax on the freight charge and reflecting the same in the ST-3 Returns. For the Cenvat Credit taken on such Service Tax paid on GTA, they were filing their ER-1 Returns. Therefore, there cannot be any allegation of suppression on the part of the Appellant. Apart from this, it can also be taken as a case of interpretation. The Appellant has carried a bonafide belief that since they are paying the Excise Duty of the value which is inclusive of the freight charges, they would be eligible for the Cenvat Credit for the Service Tax paid on GTA Services for the outward transport - the allegation of suppression does not legally sustain. The Appeal is allowed on account of limitation.

Summary

Issues involved:
Claim of Cenvat Credit for Service Tax paid on freight charges incurred from factory premises to buyer's premises. Interpretation of Rule 2(l) of Cenvat Credit Rules, 2004 post-amendment. Allegation of suppression and confirmation of demand by lower authorities.

Issue 1 - Cenvat Credit for freight charges:
The Appellant claimed Cenvat Credit for Service Tax paid on freight charges from their factory to buyer's premises. Show Cause Notice was issued to deny the credit citing Rule 2(l) post-amendment, allowing credit only 'upto the place of removal', which was deemed to be the Appellant's factory premises. Lower authorities confirmed the demand with penalties. Appellant contended that their price is inclusive of freight, Excise Duty paid on entire invoice value, and hence eligible for Cenvat Credit for outward freight Service Tax.

Issue 2 - Allegation of Suppression:
Appellant argued no suppression as Cenvat Credit and Service Tax on Reverse Charge Basis were properly recorded in ER 1 and ST-3 Returns. Appellant's consultant emphasized no suppression and urged setting aside the confirmed demand due to limitation.

Judgment:
After hearing both sides and examining the documents, it was noted that Appellant paid Excise duty on 'delivered price' without charging freight separately. However, duty payment as per Section 4 of CEA, 1944 mandates payment at the 'place of removal', which in this case was Appellant's factory premises. Rule 2(l) of Cenvat Credit Rules, 2004 specifies credit can be taken 'upto the place of removal' only, thus no merit found in Appellant's Appeal. Despite this, it was acknowledged that there was no suppression as Service Tax on freight was duly paid and recorded. Appellant's belief in eligibility for Cenvat Credit based on inclusive value was considered a bonafide interpretation. Consequently, the Appeal was allowed on the grounds of limitation, and disposed of accordingly.