Appeal allowed against demand under Section 11D as reversed CENVAT credit on input services not excise duty

CESTAT Ahmedabad allowed the appeal, setting aside the demand under Section 11D of Central Excise Act, 1944. The appellant had reversed 10.3% CENVAT credit on input services under Rule 6(3) of Cenvat Credit Rules, 2004. The tribunal held that Section 11D cannot be invoked as the reversed amount was not excise duty and had been properly reversed by the appellant. CBEC Circular No.870/08/2008-CX clarified that amounts reversed under Rule 6(3) are not subject to Section 11D provisions, even if recovered from customers. The demand was deemed unsustainable and the impugned order was set aside.

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Issues Involved:

1. Applicability of Section 11D of the Central Excise Act, 1944.
2. Denial of Cenvat Credit on input services.
3. Inclusion of freight charges in the assessable value for central excise duty on FOR basis sales.

Issue-wise Detailed Analysis:

1. Applicability of Section 11D of the Central Excise Act, 1944:

The primary issue was whether the amount reversed by the appellant under Rule 6(3) of the Cenvat Credit Rules, 2004, and recovered from the customer, falls under the purview of Section 11D of the Central Excise Act, 1944. Section 11D mandates that any amount collected as excise duty must be deposited with the Central Government. However, it was clarified through CBEC Circular No. 870/08/2008-CX dated 16.05.2008, and supported by the Tribunal's decision in the case of Jindal Tubular (India) Ltd, that amounts paid under Rule 6 of the Cenvat Credit Rules are not considered as excise duty. Therefore, Section 11D is not applicable even if such amounts are recovered from customers. The Tribunal held that since the amount was not collected as excise duty, and was already reversed, Section 11D cannot be invoked. Consequently, the demand under Section 11D was found unsustainable and was set aside.

2. Denial of Cenvat Credit on Input Services:

The appellant claimed Cenvat credit on rent-a-cab services used for business travel. The impugned order denied this credit. However, the Tribunal referred to the judgment of the High Court of Gujarat in the case of Transpek Industry Ltd., which held that rent-a-cab services used by employees for business purposes qualify as "input services," and thus, Cenvat credit is allowable. Respecting this judgment, the Tribunal concluded that the appellant is entitled to Cenvat credit for the service tax paid on rent-a-cab services. Therefore, the denial of Cenvat credit on this ground was overturned.

3. Inclusion of Freight Charges in the Assessable Value for Central Excise Duty on FOR Basis Sales:

The appellant supplied goods on a FOR (Free on Rail) basis, and the question arose whether the freight charges should be included in the assessable value for excise duty. The Tribunal referred to the Supreme Court's decision in the case of Ispat Industries Ltd., which established that the "place of removal" must be related to the seller's premises, such as the factory gate or depot, rather than the buyer's premises. Consequently, freight charges from the place of removal to the buyer's premises should not be included in the assessable value. The Tribunal found that the demand for excise duty on freight charges was not sustainable and set it aside.

Conclusion:

The Tribunal set aside the impugned order, allowing the appeal with consequential relief to the appellant. The demands under Section 11D, denial of Cenvat credit on input services, and inclusion of freight charges in the assessable value were all found unsustainable based on the legal precedents and circulars referenced.

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