2013 (1) TMI 471 - AT - Central Excise

Tribunal grants Cenvat credit for service tax on godown rental & freight, recognizing customer's premises as place of removal.

The Tribunal allowed the appeal, ruling in favor of the appellant's eligibility for Cenvat credit on service tax paid on godown rental and outward freight ... Cenvat credit of input service - FOR destination sale - place of removal - outward freight as input service - input service - renting of godown - Board Circular dated 23/08/2007 criteria - ownership and risk during transitFOR destination sale - place of removal - outward freight as input service - Board Circular dated 23/08/2007 criteria - ownership and risk during transit - Whether sales for 2006-2007 were on FOR destination basis and whether Cenvat credit of service tax paid on outward freight up to customer's premises is admissible. - HELD THAT: - The Tribunal applied the three-fold test in the Board Circular dated 23/08/2007 - (a) ownership of goods during transit remains with the supplier-manufacturer, (b) risk of loss or damage during transit is that of the supplier-manufacturer, and (c) freight element up to customer's premises is an integral part of the price. The record showed invoices describing sales as FOR destination and excise duty having been paid on the FOR price inclusive of freight. The absence of separate insurance charges in the invoices does not by itself demonstrate that the supplier did not bear the risk during transit. On these facts the place of removal must be treated as the customer's premises and outward freight up to that place is an input service eligible for Cenvat credit. The Tribunal therefore held the denial of Cenvat credit on outward freight to be incorrect (see paras 6, 7, 7.1, 8). [Paras 6, 7, 8]Sales for the period were on FOR destination basis; Cenvat credit of service tax on outward freight to customer's premises is admissible and the denial was set aside.Input service - renting of godown - Cenvat credit of input service - place of removal - Whether Cenvat credit of service tax paid on rent of the rented godown is admissible for 2006-2007. - HELD THAT: - The rented godown was used for storage of raw materials as well as finished goods prior to removal. Given the Tribunal's conclusion that place of removal is the customer's premises (so that services availed prior to removal qualify as input services), the renting of the godown falls within the definition of input service. The Tribunal therefore found the denial of Cenvat credit on godown rent to be incorrect and allowed credit, noting both its use for inputs and use prior to removal (see paras 6, 9). [Paras 6, 9]Cenvat credit of service tax on the rented godown is admissible and the impugned denial is set aside.Final Conclusion: The appeal is allowed; the impugned order denying Cenvat credit on outward freight and on rented godown is set aside and the appellant held entitled to the claimed credits for 2006-2007. Issues:1. Eligibility for Cenvat credit of service tax paid on godown rental and outward freight for transportation of finished goods.2. Interpretation of sales on FOR destination basis.3. Time limitation for issuing show cause notice.Analysis:1. The appellant, a manufacturer of automobile parts, claimed Cenvat credit for service tax paid on godown rental and outward freight for transportation of finished goods. The dispute revolved around whether the appellant was eligible for such credit during 2006-2007. The department issued a show cause notice denying the credit, citing that the appellant's sales were not on FOR destination basis as per the criteria outlined in a Board Circular. The Additional Commissioner upheld the denial, invoking an extended period under Section 11A (1) and imposed a penalty. On appeal, the Commissioner (Appeals) affirmed the decision, leading to the current appeal.2. The appellant contended that all their sales were on FOR destination basis, meeting the criteria specified in the Board Circular. They argued that the customer's premises should be considered the place of removal, making all services availed up to that point eligible for Cenvat credit. The appellant's position was supported by the fact that the sales invoices indicated FOR destination sales, with freight charges included in the price. The appellant's failure to insure the goods during transit was not deemed sufficient to negate their assumption of risk, especially when excise duty was paid on the price inclusive of freight charges.3. The Tribunal analyzed the conditions for treating a sale as FOR destination sale as per the Board Circular. It was established that if ownership and risk of goods during transit remained with the supplier, and freight was an integral part of the price up to the customer's premises, the sale could be considered FOR destination. In this case, since the appellant had paid excise duty on the FOR destination price and had not shifted the risk during transit, the Tribunal concluded that the customer's premises should be recognized as the place of removal. Consequently, the appellant was deemed eligible for Cenvat credit on outward freight and godown rental services.In conclusion, the Tribunal allowed the appeal, setting aside the previous orders and ruling in favor of the appellant's eligibility for Cenvat credit on the disputed services.