2013 (10) TMI 1434 - AT - Service Tax

Tribunal grants waiver & stays recovery for manufacturer's Service Tax credit on transportation charges.

The Tribunal granted the appellant unconditional waiver from pre-deposit of dues and stayed the recovery during the appeal's pendency. The appellant, a ... Entitlement to Cenvat credit of Service Tax on outward transportation up to place of removal - Place of removal - Assessable value inclusive of freight and insurance - Definition of input services under the Cenvat Credit Rules w.e.f. 1-4-2008Entitlement to Cenvat credit of Service Tax on outward transportation up to place of removal - Place of removal - Assessable value inclusive of freight and insurance - Cenvat credit of Service Tax paid on outward transportation up to the buyer's premises is allowable where the place of removal is the buyer's premises and excise duty was paid on value inclusive of freight and insurance. - HELD THAT: - The Tribunal found on the documentary record (purchase orders and invoices) that the terms of delivery were at the buyer's premises and the appellant bore the cost of transportation, with no separate freight charges shown on invoices, thereby discharging excise duty on a value inclusive of transportation. In view of the amendment to the definition of input services w.e.f. 1-4-2008, transportation undertaken up to the place of removal is within the scope of input services; transportation beyond the place of removal is excluded. The decision relied upon by the lower authorities was held to be distinguishable on its facts and legal footing. Applying these principles to the appellant's transactions, outward transportation up to the buyers' premises qualifies as an eligible input service and the appellant cannot be denied Cenvat credit of the Service Tax paid thereon. [Paras 5]The appellant is entitled to Cenvat credit of Service Tax paid on outward transportation up to the buyer's premises where excise duty was paid on value inclusive of freight and insurance.Stay of recovery and pre-deposit waiver - Whether pre-deposit may be waived and recovery stayed during pendency of the appeal. - HELD THAT: - Having concluded that the appellant has made out a strong prima facie case based on documentary evidence of place of removal and inclusive assessable value, the Tribunal granted unconditional waiver of pre-deposit and stayed recovery of the adjudged dues during the pendency of the appeal.Unconditional waiver from pre-deposit granted and recovery stayed during pendency of the appeal.Final Conclusion: The appeal was directed to proceed on merits; the Tribunal held that outward transportation up to the buyer's premises qualifies as an input service where the place of removal is the buyer's premises and excise duty was paid on value inclusive of freight and insurance, and accordingly granted unconditional waiver of pre-deposit and stayed recovery pending the appeal. Issues involved: Interpretation of Cenvat Credit Rules u/s 2(1), applicability of Rule 14 of Cenvat Credit Rules, imposition of penalty u/s 11A of Central Excise Act, 1944.Summary:Interpretation of Cenvat Credit Rules u/s 2(1):The appellant, a manufacturer of electric storage batteries, included charges towards freight and insurance in the assessable value of goods sold and paid excise duty accordingly. However, the department denied Cenvat credit of Service Tax paid on outward transportation charges, citing an amendment to Rule 2(1) of the Cenvat Credit Rules. The appellant contended that as per the terms of sale, the 'place of removal' was the buyer's premises, and they were entitled to the credit as they bore transportation costs.Applicability of Rule 14 of Cenvat Credit Rules:The department sought recovery of an amount along with interest and penalty under Rule 14 of the Cenvat Credit Rules, which was contested by the appellant. The appellant argued that they discharged Excise duty liability inclusive of transportation costs and thus should be granted the Cenvat credit.Imposition of penalty u/s 11A of Central Excise Act, 1944:The lower appellate authority rejected the appellant's appeal, leading to the appellant approaching the higher authority. The Tribunal noted that the 'place of removal' was the buyer's premises, making transportation up to that point an eligible input service. Relying on this interpretation, the Tribunal granted the appellant unconditional waiver from pre-deposit of dues and stayed the recovery during the appeal's pendency.