2019 (2) TMI 1488 - AT - Central Excise

Tribunal allows credit for service tax on outward freight, grants retrospective application of beneficial circulars

M/s Sanghi Industries Ltd. Versus C.C.E. Kutch (Gandhidham)

M/s Sanghi Industries Ltd. Versus C.C.E. Kutch (Gandhidham) - 2019 (369) E.L.T. 1424 (Tri. - Ahmd.) Issues Involved:1. Eligibility of Cenvat Credit on Service Tax paid on Outward Transportation (GTA services).2. Determination of 'Place of Removal' for the purpose of availing Cenvat Credit.3. Applicability of Beneficial Circulars Retrospectively.4. Limitation and Suppression of Facts.Detailed Analysis:1. Eligibility of Cenvat Credit on Service Tax paid on Outward Transportation (GTA services):The appellant, engaged in the manufacture of cement, availed services of Goods Transport Agency (GTA) for transportation of cement. The dispute arose regarding the eligibility of Cenvat Credit on service tax paid on outward transportation of goods. The adjudicating authorities denied the credit, stating that it is only available up to the 'place of removal' as per Rule 2(l) of the Cenvat Credit Rules, 2004. The appellant argued that the goods were sold on a FOR (Free on Rail/Road) basis, meaning all expenses up to delivery, including transportation and damages, were borne by them. The price charged to the customer included freight and insurance charges, making them eligible for the credit. The Tribunal found that since the ownership and risk of goods remained with the appellant until delivery, the place of removal extended to the buyer's doorstep, making the appellant eligible for the credit.2. Determination of 'Place of Removal' for the purpose of availing Cenvat Credit:The determination of the 'place of removal' was crucial. The appellant cited various circulars and judgments to argue that the place of removal should be considered the buyer's premises when goods are sold on a FOR basis. The Tribunal referred to Circular No. 1065/4/2018-CX, which clarifies that the place of removal is the point of sale, and in cases where goods are sold on a FOR basis, the place of removal extends to the buyer's premises. The Tribunal also cited the Supreme Court's judgment in the case of CCE vs. Roofit Industries Ltd., which held that when goods are sold on a FOR basis, the freight paid on outward transportation qualifies as 'input service.'3. Applicability of Beneficial Circulars Retrospectively:The appellant argued that even though certain circulars were withdrawn in 2018, the benefit of those circulars should be available for the relevant period of this case. The Tribunal agreed, stating that beneficial circulars cannot be withdrawn retrospectively. The law on this issue has been settled by the Supreme Court, and the benefit of the circulars in force at the relevant time should be available to the appellant.4. Limitation and Suppression of Facts:The appellant contended that the demand was time-barred as there was no suppression of facts. The issue of Cenvat Credit on outward GTA was under litigation at various judicial forums, making it a matter of interpretation rather than suppression. The Tribunal found that the issue was indeed contentious and subject to various clarifications and litigations, thereby ruling out any malafide intention on the appellant's part. Consequently, the extended period for demand was not sustainable on the grounds of time bar.Conclusion:The Tribunal concluded that the appellants are eligible for the credit of service tax paid on outward freight, as the ownership and risk of goods remained with them until delivery to the buyer's doorstep. The impugned orders were set aside, and the appeals were allowed with consequential reliefs. The Tribunal also noted that the beneficial circulars in force at the relevant time should be applied retrospectively, and the demands for the extended period were not sustainable due to the absence of suppression of facts.