2014 (10) TMI 515 - HC - Central Excise

Denial of Cenvat Credit Upheld for Transportation Costs

The case involved the denial of cenvat credit for service tax and freight paid by M/s. Parle on inward and outward transportation. The court upheld the ... CENVAT Credit - Freight GTA - Whether Tribunal was justified in denying the cenvat credit of service tax paid and freight paid by M/s. Parle on inward and outward transportation (from the Appellants' factory to depots of M/s. Parle) on the ground that depots of M/s Parle cannot be the 'place of removal' and that freight charges were not borne by the Appellants but M/s. Parle - Held that:- Clear finding, which has been recorded both by the Commissioner (Appeals) and by the Tribunal, is that the sale had not taken place on an 'FOR Destination' basis. Hence, the place of removal in the present case is the factory gate of the appellant and not the Depot of Parle Biscuits. As a matter of fact, as held by the Commissioner (Appeals), the liability on account of freight is borne by Parle Biscuits. No amount was borne by the appellant towards freight under the agreement with Parle Biscuits. Hence, in this view of the matter, the Tribunal was justified in coming to the conclusion that the Cenvat Credit on Service Tax paid on GTA Service availed for the transportation of the goods from the factory of the appellant to the Depot of Parle Biscuits, has been correctly denied. The view which has been taken by the Tribunal is in accordance with law - No substantial question of law arises - Decided against Assessee. Issues:1. Denial of cenvat credit for service tax and freight paid by M/s. Parle on inward and outward transportation.2. Denial of cenvat credit for service tax paid on outward freight to Goods Transport Agency (GTA).3. Denial of cenvat credit for service tax paid on outward transportation to the depots of M/s. Parle.Analysis:1. The appeal concerns the denial of cenvat credit for service tax and freight paid by M/s. Parle on inward and outward transportation. The appellant manufactures biscuits using raw materials supplied by Parle Biscuits, and the finished goods are cleared to Parle Biscuits' Depot. The place of removal is determined to be the factory gate of the appellant, not the Depot of Parle Biscuits. As per Rule 2(l) of the Cenvat Credit Rules, 2004, the appellant is entitled to credit only up to the place of removal. Since Parle Biscuits bears the freight cost and no amount is borne by the appellant, the Tribunal's denial of cenvat credit is deemed correct. The judgment affirms the Tribunal's decision, as it aligns with the legal provisions.2. The second issue pertains to the denial of cenvat credit for service tax paid on outward freight to Goods Transport Agency (GTA). The appellant argues that the 'place of removal' should be considered the Depot of Parle Biscuits, relying on Section 4(3)(c) of the Central Excise Act, 1944. However, since the sale did not occur on an 'FOR Destination' basis and the liability for freight is on Parle Biscuits, the Tribunal's decision to deny the credit is upheld. The judgment emphasizes that the appellant cannot claim credit beyond the actual place of removal, which is the factory gate, as established by the Commissioner (Appeals) and the Tribunal.3. Lastly, the issue concerns the denial of cenvat credit for service tax paid on outward transportation to the depots of M/s. Parle. The Tribunal's decision is supported by the fact that the goods are cleared at the factory gate, and the freight cost is borne by Parle Biscuits, not the appellant. Since the sale is not on an 'FOR Destination' basis, the place of removal remains the factory gate, justifying the denial of cenvat credit. The judgment concludes that no substantial question of law arises from the appeal, leading to its dismissal without costs.