2019 (1) TMI 45 - AT - Central Excise

Tribunal Upholds Disallowance of CENVAT Credit on GTA Services

Shakunt Enterprises Pvt Ltd Versus Commissioner Of Central Tax And Central Excise, Belgaum

The Tribunal upheld the disallowance of CENVAT credit on GTA services beyond the place of removal, aligning with the Ultratech Cement Ltd. judgment. It ... CENVAT Credit - input services - GTA Service - ‘FOR’ basis - Rule 2(1) of the CCR, 2004 - Held that:- The appellants as per the contracts entered into between the parties, the appellants are supplying the goods on ‘FOR’ basis and are availing the credit on Service Tax paid on GTA services on the ground that it falls under the definition of ‘input service’ as contained in Rule 2(1) of the CCR, 2004 - in the purchase order itself the terms and conditions are on ‘FOR’ basis and ownership remains with the appellant till the goods are delivered to the buyer at the buyers’ premises and the cost of transit insurance and freight in respect of the goods sold are borne by the appellant. Extended period of limitation - suppression of facts - Held that:- The appellants have not suppressed any fact and they have been filing return regularly and has been showing the CENVAT credit availed on various input services including the GTA services - the Service Tax paid on GTA services is admissible as credit being input service and there were decisions in favor of the appellant regarding the same issue before the decisions of the Apex Court in the case of Ultratech Cement Ltd. [2018 (2) TMI 117 - SUPREME COURT OF INDIA] - the demand beyond the normal period of limitation is set aside as there was no intention to evade payment of duty. Penalty - Held that:- The penalties imposed on the appellant are also not sustainable. Appeal disposed off. Issues:- Admissibility of CENVAT credit on GTA services for transport of goods- Interpretation of 'place of removal' for availing CENVAT credit- Applicability of extended period of limitation for duty evasionAdmissibility of CENVAT credit on GTA services for transport of goods:The appellants, engaged in manufacturing Copper Coated Welding Wires, cleared goods on 'FOR' basis for delivery at customers' premises. The issue revolved around availing CENVAT credit on outward freight services, claimed as 'input service'. The appellants argued that ownership of goods remained with them until delivery at buyers' premises, justifying the credit. They cited judicial precedents and Circulars to support their claim. However, the AR contended that the Supreme Court's decision in Ultratech Cement Ltd. case disallowed such credit. The Tribunal found that the appellants' contracts indicated 'FOR' basis sales, with ownership transferring at buyers' premises, aligning with Circulars' interpretation. The Tribunal upheld the disallowance of CENVAT credit on GTA services based on the Ultratech Cement Ltd. judgment.Interpretation of 'place of removal' for availing CENVAT credit:The Tribunal analyzed the concept of 'place of removal' crucial for determining CENVAT credit eligibility. It highlighted that the property in goods passed at the buyers' premises, as per the contracts and Circulars. The Tribunal emphasized that the credit of input service was only available up to the place of removal. Referring to the Ultratech Cement Ltd. case, the Tribunal held that the Circular issued post-decision could not override the Supreme Court's ruling. Thus, it concluded that the appellants were not entitled to CENVAT credit on GTA services beyond the place of removal.Applicability of extended period of limitation for duty evasion:Regarding the extended period of limitation invoked for duty evasion, the Tribunal found no suppression of facts by the appellants. It noted that the appellants regularly filed returns, disclosing CENVAT credit availed on various input services, including GTA services. Given the precedents in favor of the appellants before the Ultratech Cement Ltd. decision, the Tribunal set aside the demand beyond the normal limitation period. Consequently, the penalties imposed on the appellants were deemed unsustainable, leading to the disposal of both appeals in favor of the appellants.Conclusion:The Tribunal upheld the disallowance of CENVAT credit on GTA services beyond the place of removal, following the Ultratech Cement Ltd. judgment. It also ruled in favor of the appellants regarding the extended period of limitation, finding no intent to evade duty. The penalties were set aside, and the demands for the normal period were upheld, concluding the case.