2024 (7) TMI 469 - AT - Central Excise

CENVAT Credit - Goods Transport Agency (GTA) service used for transportation of finished goods - whether such Cenvat credit is recoverable treating it as wrongly availed credit, along with interest and penalty under Rule 15(1) of CCR, 2004? - HELD THAT - The transportation charges which are to be added in value have to be up to the stage of the transfer of the ownership of goods inasmuch as once the ownership in goods stands transferred to the buyer, any expenditure incurred thereafter has to be on buyer s account and cannot be a component which would be included while ascertaining the valuation of the goods manufactured by the buyer. Thus, the principle of law, is in determining at what point of time sale is effected namely whether it is on factory gate or at a later point of time i.e. when the delivery of the goods is effected to the buyer at his premises, which can be seen in the light of provisions of the Sale of Goods Act, 1930 by applying the same to the facts of each case to determine as to when the ownership in the goods is transferred from the seller to the buyer. Plain reading of the above legal provisions under Section 4 of the Central Excise Act, 1944 state that for the purpose of valuation of excisable goods, for determining the levy of central excise duty if chargeable on ad valorem basis, it shall be the transaction value. Where the goods are sold by the assessee, for delivery at the time and place of removal, and where the assessee and the buyer of the goods are not related and the price is the sole consideration for the sale, then the same shall be the transaction value. Thus, it is clear that the value shall be determined with reference to goods delivered at the time and at the place of removal. The Purchase Order placed by the customer-BAL with the appellant specifically provide for delivery as follows - Delivery Term FREE DELIVERY AT OUR WORKS . Further, the payment terms for the sale of goods is 45 days from the date of goods being received at the customer s factory works. Thus, it is found that the sale of goods in the present case takes place when the goods are delivered by the appellant and the factory works of the customer-BAL. It is also found that the impugned order did not discuss the facts of the case to arrive at a decision on place of removal and further assumed that the customer s premises to be the place of removal, without any basis and without examination of the facts of the case. Thus, the impugned order cannot be sustained in law. There are no substance in the impugned order dated 29.09.2020, in denying the Cenvat credit on input services without proper examination - the appellant is eligible for the credit of service tax paid on outward freight charges, where the sale is on FOR basis or delivery at works on FOR, in terms of Rule 2(l) of the Cenvat Credit Rules, 2004 read with Section 4 of the Central Excise Act, 1944 - the impugned order is set aside by allowing the appeal filed by the appellant - appeal allowed.

Summary

Issues Involved:
1. Admissibility of Cenvat credit on Goods Transport Agency (GTA) service for transportation of finished goods.
2. Determination of "place of removal" under the Central Excise Act, 1944.
3. Interpretation of Rule 2(l) of the Cenvat Credit Rules, 2004.
4. Applicability of extended period of limitation and penalty imposition.

Issue-wise Detailed Analysis:

1. Admissibility of Cenvat credit on Goods Transport Agency (GTA) service for transportation of finished goods:
The appellant, a manufacturer of automotive components, availed Cenvat credit on service tax paid under reverse charge mechanism on GTA service for transporting goods to M/s Bajaj Auto Limited (BAL) on FOR basis. The Department contended that the credit was availed for transportation beyond the "place of removal," which they interpreted as the factory gate. The Tribunal examined whether this interpretation aligns with Rule 2(l) of the Cenvat Credit Rules, 2004, and relevant case laws.

2. Determination of "place of removal" under the Central Excise Act, 1944:
The Tribunal analyzed the definition of "place of removal" under Section 4 of the Central Excise Act, 1944, which includes the factory, warehouse, depot, or any other premises from where goods are sold after clearance from the factory. The Tribunal referred to various judgments, including CCE Vs. Roofit Industries Ltd. and CCE Vs. Emco Ltd., which emphasize that the "place of removal" is determined by the point at which the sale is effected and ownership is transferred.

3. Interpretation of Rule 2(l) of the Cenvat Credit Rules, 2004:
The Tribunal examined the definition of "input service" under Rule 2(l) of the Cenvat Credit Rules, 2004, which includes services used in or in relation to the manufacture and clearance of final products up to the place of removal. The Tribunal noted that the appellant's case falls under the inclusive part of the definition, as the GTA service was used for transportation up to the place of removal, which in this case was the customer’s premises as per the FOR contract.

4. Applicability of extended period of limitation and penalty imposition:
The Tribunal held that the issue was not free from doubt and was subject to various litigations. Therefore, invoking the extended period of limitation and imposing penalties was not justified. The Tribunal cited the CBEC circular dated 08.06.2018, which clarified that in cases involving interpretation of law, the extended period should not be invoked, and penalties should not be imposed.

Conclusion:
The Tribunal concluded that the appellant is eligible for the Cenvat credit on GTA services used for transportation of goods on FOR basis to the customer’s premises. The impugned order was set aside, and the appeal was allowed with consequential relief. The Tribunal emphasized that the place of removal in this case was the customer’s premises, and the transportation costs were integral to the sale, thus qualifying for Cenvat credit.