Whether Cenvat credit can be taken on outward freight payable beyond place of removal?

PJ/Case Law /2016-17/3259

Case-COMMISSIONER OF C. EX., CHANDIGARH-I Versus RINE MACHINE TOOLS

Citation-2016 (42) S.T.R. 809 (P & H)

Brief Facts-In short the facts of the case are that the respondent is engaged in the manufacture of Railway Track parts etc. falling under Chapters 86, 87 and 94 of the Schedule to the Central Excise Tariff Act, 1985 and is holding Service Tax registration for the services under the category of Goods Transport Agency as required under the provisions of the Finance Act, 1994. It was found during the course of scrutiny of ER-1 returns of the respondent, for the periods from 1-1-2005 to 31-3-2005 and 1-4-2005 to 31-12-2005 that it had availed the credit of Service tax amounting to Rs. 24,222/- along with Rs. 484/- as education cess paid on taxable services falling under the category of Goods Transport Agency Services on account of freight paid on outward transportation of goods from the factory to their customers i.e. beyond the place of removal of goods. A show cause notice for recovery dated 3-2-2006 (Annexure A-1) was accordingly issued to the respondent along with interest and penalty under Section 76 of the Act. The adjudicating authority confirmed the demand by order dated 30-3-2007 (Annexure A-2) passed in Order-in-Original No. 52/AC/ST/07, dated 30-3-2007 and a personal penalty was imposed on the respondent under Sections 76 and 78 of the Act and Rule 15 of the Cenvat Credit Rules, 2004 (in short “2004 Rules”). It is how the Revenue is in appeal before us.
The only issue that arises for consideration in this appeal is, whether the assessee was entitled for allowing Cenvat Credit on outward freight beyond the place of removal as per the definition of input service as given in Rule 2(l) of the 2004 Rules.

Appelants Contention-This appeal under Section 35G of the Central Excise Act, 1944 (for short “the Act”) has been filed by the Revenue against the order dated 18-9-2009 (Annexure A/4), passed by the Customs, Excise and Services Tax Appellate Tribunal, Principal Bench, New Delhi, (for short “the Tribunal”) proposing that the following substantial question of law arises for determination by this Court:
“Whether the Hon’ble Tribunal is correct in holding that the Cenvat Credit on Outward Freight is allowable to the party beyond the place of removal when as per the definition of input service as given in Rule 2(l) of the Cenvat Credit Rules, 2004, the credit is specifically limited to service tax paid on outward freight up to the place of removal and when it has not been established that the condition as prescribed in para 8.2 of the Board’s circular No. 97/8/2007-S.T., dated 23-8-2007 are satisfied in this case?”
Respondents Contention-The respondent filed appeal before the Commissioner (Appeals) who vide order-in-appeal passed on 12-7-2007 (Annexure A-3) rejected the appeal, except qua imposition of penalty under Section 78 of the Act. The respondent still preferred further appeal before the Tribunal. The Tribunal allowed the appeal vide order dated 18-9-2009, Annexure A-4 and set aside the orders impugned therein.
Reasoning Of Judgement-This order will dispose of Central Excise Appeal Nos. 116 and 117 of 2010 as identical question of law is involved therein. The facts have, however, been taken from C.E.A. No. 116 of 2010.

Decision-Appeals dismissed

Comment-The gist of the case is that in respect of the GTA service the credit of service tax paid on outward freight up to the customer’s premises i.e. beyond the place of removal is available to the assessee based on the board’s circular.

Prepared By-Neelam Jain

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PJ/Case Law /2016-17/3259

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