2025 (3) TMI 1448 - AT - Central Excise

Cenvat credit demand on transport service set aside due to limitation despite merit under Section 11A

CESTAT Hyderabad allowed the appeal on limitation grounds while upholding the merit of the demand. The appellant claimed Cenvat credit on goods transport ... Cenvat Credit on the Goods Transport Service (GTS) for outward transportation of cement from the depot to the buyer's premises on a FOR (Free on Road) basis - Extended period of limitation - HELD THAT:- It is not in dispute in this present appeal that wherever the sale has been on FOR basis, as evidenced from record, the credits have allowed and it has not been disputed by the Department any further. However, in the case of Rs. 3,44,228/-, the appellant could not produce sufficient documents to satisfy the Adjudicating Authority that the ex-depot sales were also in the nature of FOR or that they were essentially FOR sale. The documents being cited as evidence before this Bench to prove that sales were on FOR basis pertains to the month of April as pointed by the Learned AR and that also is not very categorical as to whether the sale was on FOR basis or otherwise. There is no other corroborative evidence that it is on FOR basis. The Adjudicating Authority has gone through various case laws as well as evidence adduced by the appellant at para 22 and observed that the documents furnished by the assessee related to the clearance of final products directly through the factory to the buyers premises and that they have not produced any documents / information evidencing (i) the sale from Depot/Premises of Consignment Agent to the customer’s premises was on FOR destination basis, (ii) transfer of property at buyer’s premises and (iii) inclusion of the freight charges in the assessable value and payment of Excise duty on the said freight charges. Therefore, essentially, the Adjudicating Authority has held that the Assessee had clearly failed to determine place of removal with reference to the points of sale and therefore the credit taken at outward freight on transportation of finished goods were clearly beyond the place of removal in relation to sale ex-depot. Extended period of limitation - HELD THAT:- The show cause notice has not adduced any substantive ground to invoke the ingredients required for invoking the extended period. Conclusion - While on merit the demand is sustainable in the impugned order as the appellant have clearly failed to bring on record the evidence substantiating that sales were on FOR basis even in the case of ex-depot, however, as far as invocation of extended period is concerned, that it is not sustainable. Therefore, while on merit it is upheld, but on limitation, the demand is not sustained. Since, the entire demand is barred by limitation, the appeal to the extent of setting aside the demand and penalty by Adjudicating Authority is set aside on this count itself. Appeal allowed. ISSUES PRESENTED and CONSIDEREDThe primary issue in this appeal was whether the appellant, M/s JSW Cement Ltd., is entitled to Cenvat Credit on Goods Transport Service (GTS) for outward transportation of cement from the depot to the buyer's premises on a FOR (Free on Road) basis. Additionally, the invocation of the extended period for demand and the imposition of penalties were also contested.ISSUE-WISE DETAILED ANALYSISRelevant Legal Framework and PrecedentsThe legal framework revolves around the interpretation of the Cenvat Credit Rules (CCR) 2004, specifically Rule 2(l), which defines input services eligible for credit, and Rule 14(1)(ii) concerning the recovery of Cenvat Credit. The Central Excise Act, 1994 (CEA), particularly Section 11A(10), also plays a role in determining the eligibility for credit and the conditions for invoking the extended period for demand.Key precedents considered include the judgments of the Supreme Court in Ultratech Cement, Roofit Industries Ltd., and Ispat Industries Ltd., which provide guidance on determining the 'place of removal' and the eligibility for Cenvat Credit on transportation services.Court's Interpretation and ReasoningThe Tribunal focused on whether the sales from the depot were on a FOR basis, which would determine the eligibility for Cenvat Credit. The appellant argued that sales were on a FOR basis, meaning the transaction was completed at the buyer's premises, thus entitling them to credit. The Tribunal noted that the appellant failed to provide sufficient documentary evidence to substantiate this claim for the disputed amount of Rs. 3,44,228/-.Regarding the invocation of the extended period, the Tribunal observed that the show cause notice did not establish grounds of fraud, collusion, or wilful misstatement, which are necessary for invoking the extended period under Section 11A(4) of the CEA. The Tribunal also considered the interpretational issues surrounding the 'place of removal' during the relevant period, which were clarified in subsequent judgments and Circulars.Key Evidence and FindingsThe appellant provided documents claiming that sales from the depot were on a FOR basis. However, the Adjudicating Authority found these documents insufficient to prove that the sales were indeed on a FOR basis. The Tribunal agreed with this finding, noting the lack of corroborative evidence.Application of Law to FactsThe Tribunal applied the principles established in relevant case law to the facts, determining that the appellant did not adequately demonstrate that the sales from the depot were on a FOR basis. Consequently, the demand for Cenvat Credit for the disputed amount was upheld.In terms of the extended period, the Tribunal found that the lack of substantive evidence for fraud or wilful misstatement, combined with the interpretational issues of the time, did not justify invoking the extended period.Treatment of Competing ArgumentsThe Tribunal considered the appellant's reliance on various judgments and Circulars, which clarified the determination of the 'place of removal.' However, it found that these did not support the appellant's case for the specific disputed amount due to insufficient evidence. The Tribunal also addressed the appellant's argument against the invocation of the extended period, finding merit in the argument due to the absence of fraud or misstatement.ConclusionsThe Tribunal concluded that while the demand for Cenvat Credit on the merits was sustainable due to the appellant's failure to prove the FOR basis of sales, the invocation of the extended period was not justified, leading to the setting aside of the demand and penalty based on limitation grounds.SIGNIFICANT HOLDINGSCore Principles EstablishedThe Tribunal reaffirmed the principle that eligibility for Cenvat Credit on outward transportation services depends on proving that sales are on a FOR basis, with the transaction completing at the buyer's premises. It also highlighted the necessity of substantive evidence to justify the invocation of the extended period for demand.Final Determinations on Each IssueThe Tribunal upheld the demand for Cenvat Credit on the merits due to insufficient evidence from the appellant but set aside the demand and penalty on the grounds of limitation, as the extended period's invocation was unjustified.