Appellant denied credit for separate freight charges; penalty waived; appeal partially allowed

The tribunal ruled that the appellant was not entitled to Cenvat credit on service tax paid for outward transportation services as the freight charges were separately invoiced to customers, not included in the assessable value. The demand for the extended period was set aside due to the appellant's lack of mala fide intention to evade duty. The penalty under Cenvat Credit Rule was also waived. The appeal was partially allowed, with the remaining demand to be re-quantified by the adjudicating authority.

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Issues involved:
Whether the appellant is entitled to Cenvat credit of Service Tax paid on Outward Transportation Service for clearance of Excisable Goods.

Analysis:

Issue 1: Entitlement to Cenvat Credit on Outward Transportation Service
The appellant claimed Cenvat credit on service tax paid on transportation charges for goods sold on FOR basis. The appellant argued that since the freight was included in the invoice value and the sale was on FOR basis, the service tax on transportation charges should be admissible for Cenvat Credit. The appellant cited various judgments in support of their claim. On the other hand, the revenue contended that the demand for the extended period should be upheld. The tribunal considered previous cases like M/s. Ultratech Cements Limited and M/s. Sanghi Industries Limited, where Cenvat credit was allowed because the freight was included in the assessable value and excise duty was paid accordingly. However, in the present case, the invoice showed that the freight amount was charged separately to customers and not included in the assessable value. The tribunal concluded that the appellant was not entitled to Cenvat Credit based on the specific facts of the case.

Issue 2: Interpretation of Cenvat Credit Rules and Limitation
The appellant argued that the issue involved interpretation of Cenvat Credit Rules and there was a history of litigation on the admissibility of Cenvat Credit on outward transportation. They maintained that there was no intention to evade excise duty as they had declared the Cenvat Credit in their monthly returns. The tribunal acknowledged the interpretation issue but found that the appellant did not have a mala fide intention to evade duty. Therefore, the demand for the extended period was set aside, and the remaining demand was to be re-quantified by the adjudicating authority.

Issue 3: Penalty under Cenvat Credit Rule
Considering the appellant's lack of intention to evade duty, the tribunal ruled that the appellant was not liable for penalty under rule 15(2) of Cenvat Credit Rule 2004 read with section 11 AC of the Central Excise Act 1944. Consequently, the penalty involved in the case was set aside.

In conclusion, the tribunal modified the impugned order, partially allowing the appeal and setting aside the demand for the extended period. The remaining demand was to be re-quantified, and the penalty was waived due to the appellant's lack of intention to evade duty.

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