2017 (11) TMI 607 - AT - Central Excise

Tribunal Remands Case for Reevaluation: Consider Ownership & Sale Conditions for Cenvat Credit Eligibility

The Tribunal remanded the case back to the Commissioner (Appeals) for reevaluation, emphasizing the need to consider ownership and sale conditions to ... CENVAT credit - input services - outward transportation of finished products for clearances within India as well as for export - place of removal - Revenue's case is that Since the place of removal is factory gate, the appellant is not eligible for credit for clearances of goods beyond the place of removal/factory gate - whether the appellant is eligible for credit on service tax paid on outward transportation services availed for domestic clearances of finished products upto the buyer's premises? - Held that: - The Board vide Circular No.97/8/2007-ST dt.23.8.2007 has clarified that credit is admissible for outward transportation upto buyer s premises if the sale is on FOR basis - credit would be admissible upto the buyer s premises, if the condition in the Circular No.97/8/2007-ST dt.23.8.2007 is satisfied or sale is on FOR basis or the ownership rests with the manufacturer till the goods are delivered to the buyer s premises. The evidences in this regard having not dealt with in the impugned order, the matter requires to be remanded to the Commissioner (Appeals) who shall look into the evidence / documents furnished by the appellant and consider the eligibility of credit - appeal allowed by way of remand. Issues:1. Eligibility of Cenvat credit on outward transportation of finished products for domestic clearances.2. Interpretation of the definition of input services in Cenvat Credit Rules, 2004.3. Applicability of Circular No.97/8/2007-ST regarding credit on outward transportation up to the buyer's premises.4. Comparison with previous judgments and decisions on similar issues.5. Disallowance of credit by the Commissioner (Appeals) and subsequent appeal to the Tribunal.Issue 1: Eligibility of Cenvat credit on outward transportation for domestic clearancesThe case involved a dispute regarding the eligibility of the appellants, manufacturers of Motor Vehicle parts, for Cenvat credit on outward transportation of finished products for domestic clearances up to the buyer's premises. The Department contended that credit is only admissible up to the place of removal, defined as the factory gate, and not beyond that point. The Commissioner (Appeals) disallowed the credit for domestic clearances but allowed it for export clearances. The Tribunal considered the evidence presented by the appellant, including purchase orders showing sales on FOR basis, and referred to Circular No.97/8/2007-ST, which allows credit up to the buyer's premises for FOR basis sales. The Tribunal found that the Commissioner (Appeals) failed to consider this aspect adequately and remanded the matter for a reevaluation of evidence to determine the eligibility of credit based on ownership and sale conditions.Issue 2: Interpretation of the definition of input servicesThe central issue revolved around the interpretation of the definition of input services under the Cenvat Credit Rules, 2004. The Commissioner (Appeals) held that credit is only admissible up to the place of removal, i.e., the factory gate. However, the appellant argued that ownership of goods remains with them until delivery at the buyer's premises for domestic sales on FOR basis. The Tribunal emphasized the need to establish ownership and sale conditions to determine the admissibility of credit on outward transportation services for domestic clearances.Issue 3: Applicability of Circular No.97/8/2007-STCircular No.97/8/2007-ST clarified that credit on outward transportation is eligible up to the buyer's premises for sales on FOR basis. The Tribunal highlighted the importance of satisfying the conditions laid out in the circular to claim credit beyond the factory gate. The appellant's argument centered on the ownership of goods and sale conditions, emphasizing that credit should be allowed up to the buyer's premises if these conditions are met.Issue 4: Comparison with previous judgmentsThe appellant cited various judgments in their favor, including decisions by different High Courts and the Tribunal in similar cases. These judgments supported the admissibility of credit on outward transportation up to the buyer's premises under specific conditions, such as sales on FOR basis or ownership remaining with the manufacturer until delivery. The Tribunal considered these precedents in determining the eligibility of credit for the appellants in the present case.Issue 5: Disallowance of credit and appeal to the TribunalThe Commissioner (Appeals) disallowed the credit on outward transportation for domestic clearances, leading the appellants to appeal to the Tribunal. The Tribunal, after considering the arguments and evidence presented, set aside the disallowance and remanded the issue back to the Commissioner (Appeals) for a reassessment based on ownership and sale conditions. The Tribunal's decision highlighted the need for a thorough examination of evidence to determine the eligibility of credit in accordance with relevant legal provisions and circulars.This comprehensive analysis of the judgment addresses the key issues, interpretations, precedents, and the Tribunal's decision regarding the eligibility of Cenvat credit on outward transportation for domestic clearances in the case.