CENVAT credit on Courier - 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 - Demand hit limitation, penalties set aside: CESTAT by Majority
By TIOL News Service
NEW DELHI, AUG 11, 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.
After receiving orders from their customers the appellant sells 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.
Perhaps awed by the whopping figure of Rs.2.61 crores or otherwise, 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 rest was done by the CCE, Gurgaon.
The appellant is before the CESTAT.
The Member (Judicial) 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."
On the question of limitation, the Member (J) again referred to the cited 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 but differed on the point of limitation.
In view of the difference in opinion the matter came to be referred to the third Member.
We reported this order as 2014-TIOL-549-CESTAT-DEL.
The Third Memberhas passed an order recently.
Heviewed – The Karnataka High Court in the case of ABB Limited 2011-TIOL-395-HC-KAR-ST has held that prior to 01.04.2008 the credit of service tax paid on outward transportation is admissible but a contrary view has been taken by the Calcutta High Court in the case of Vesuvious India Limited 2013-TIOL-1038-HC-KOL-ST .
The Vice President further observed that the SCN was issued only on the ground that credit of service tax paid on outward transportation is not admissible in view of definition of the input service and the credit was not being denied on the ground that the freight is not part of assessable value or any reason. Inasmuch as the only allegation in the show cause notice is that the appellant has wrongly availed credit which is not admissible and deliberately suppressed the fact with intent to evade payment of duty, the third Member observed.
Noting that theappellants were regularly filing statutory returns and in view of LB decision in ABB Ltd. which was upheld by the Karnataka High Court, the Vice President agreed with the view taken by the Member (Judicial) that the allegation of suppression of facts with intent to evade payment of duty is not sustainable and hence the demand beyond the normal period is not sustainable. So also, setting aside of penalties was agreed upon.
Therefore, the Majority view is -
"…major part of the demand is held to be barred by limitation and is accordingly set aside. However, a part of the demand, which falls within the limitation period is required to be recalculated by the lower authorities. Further, penalty imposed upon the appellant is also set aside."
The appeal was disposed of in the above terms.
(See 2014-TIOL-1472-CESTAT-DEL)
