ST - CENVAT credit on Courier services - as manufactured goods are notified u/s 4A, 'place of removal' would be factory gate and hence credit of ST paid on outward freight from place of removal is not admissible - however, on issue of limitation, Members have divergent views - Matter referred to TM: CESTAT
By TIOL News Service
NEW DELHI, 12 APR, 2014: THE period of dispute in this case is from April 2006 to December 2008.
The appellant is engaged in manufacture of automobile parts, components and assemblies.
The appellant after receiving orders from their customers sell the goods from their factory after issue of an invoice and despatch the goods to their customers through courier. The Service tax paid on the courier service was availed as CENVAT credit by the appellant. The CENVAT credit so availed during the impugned period is Rs.2.61 crores.
It is the view of the department that the courier service availed for despatch of the goods to their customers being in the nature of outward freight from the place of removal, is not covered by the definition of 'input service' as given in Rule 2(l) of CCR, 2004.
Resultantly, a SCN was issued and the demand was confirmed by the CCE, Gurgaon with interest and penalty galore.
The appellant is before the CESTAT.
They submit that in view of the Karnataka HC decision in ABB Ltd. - 2011-TIOL-395-HC-KAR-ST upholding the LB decision - 2009-TIOL-830-CESTAT-BANG-LB, Outward transportation of finished goods from the place of removal is covered by definition of 'input service' upto 31.03.2008 and service tax paid thereon is eligible as CENVAT Credit; that same view has been taken by the Tribunal in the case of Gujarat Sidhee Cement Ltd. - 2007-TIOL-1453-CESTAT-AHM;that in the case of Universal Cables Ltd. - 2007-TIOL-540-CESTAT-DEL the Bench has held that courier service used by the appellant for despatch of their final product is covered by the definition of 'input service' and is eligible for CENVAT credit.
Further, they have also paid an amount of Rs.88,11,749/- for the period from 1/3/08 to 31/12/08 by debit entry dated 19/1/09 in the RG-23 Pt. II account, as intimated by them in their letter dated 19/1/09 and, therefore,there is no justification for confirmation of Rs.1,72,95,410/- for the period prior to March 2008.
The Revenue representative relied on the P&H High Court decision in Ambuja Cements - 2009-TIOL-110-HC-P&H-ST and submitted that the credit of service tax paid on the outward transportation of finished goods from the factory/depot to the customer's premises can be treated as input service only if the conditions as laid down in the Board Circular No. 97/6/2007-ST dated 23/8/2007 are fulfilled; that as per the said decision, the sales have to be on FOR basis but since the appellant has not placed any evidence on record in this regard, the appeal should be rejected.
The Member (Judicial) inter alia adverted to the decision in Ultratech Cement Ltd. - 2014-TIOL-478-CESTAT-DEL and after extracting paragraphs 9.7 & 10.1 from the order observed -
"12. In view of the above declaration of law by the Tribunal, it has to be held that where the final product is being cleared either under specific rate of duty or in terms of the MRP declaration as per section 4A of the Act, the 'place of removal' would be factory gate. If that be so the CENVAT credit of Service Tax paid on the courier services from or upto the factory gate would not be available to the appellant.”
To answer the question of limitation, the Member (J) again referred to the Ultratech Cement decision and after extracting paragraph 8.1 of the said judgment observed -
"14. Inasmuch as show cause notice in the present case stands issued on 19.02.2009 for the period April 2006 to December 2008, the major part of the demand would be barred by limitation. However, a small portion would fall within the limitation period for which the matter is being remanded for quantification of the demand falling within the limitation period.”
Penalty was also set aside by holding that the appellant had not suppressed or had any malafide and the issue was bonafide interpretation of law.
The Member (Technical) concurred with the finding of Member (Judicial) as far as entitlement to CENVAT credit was concerned.
However, the conclusion of Member (J) on the point of limitation by relying on the Tribunal's final order in the case of Ultratech Cement was not subscribed to by the Member (T) by opining that in ABB Ltd. case the issue was never in relation to Section 4A or specific rate of duty and, therefore, the decision had no applicability. Same was the case with the other decisions in Gujarat Sidhee & Ambuja Cement, the Member (T) observed.
The Member (T), therefore, concluded that there were no conflicting judgments on this aspect of CENVAT credit entitlement and hence the extended period was rightly invoked by the lower authorities.
In view of the difference in opinion on the aspect of limitation the matter is placed before the President for reference to the third Member.
(See 2014-TIOL-549-CESTAT-DEL)
