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of <h1>Place of removal for OEM clearances and CENVAT credit on outward transportation remanded pending contract verification</h1> Determination of the place of removal for clearances to OEMs is remitted for contract-wise and transaction-wise factual verification to decide whether ... Place of removal - clearances made to OEMs - CENVAT credit on outward transportation (GTA services) - extended period of limitation - interest under Rule 14 of the CENVAT Credit Rules, 2004 read with Section 11AA of the Central Excise Act, 1944 - penalty u/s 11AC of the Central Excise Act, 1944 - Whether, the place of removal for clearances made by the appellant to OEM customers is the factory gate of the appellant or the premises of the OEM customers, when the supplies are made on FOR destination basis. - HELD THAT:- Since the determination of the place of removal is foundational to the dispute and depends upon verification of primary contractual documents, the matter requires to be remanded for limited factual verification. Accordingly, the matter is remanded to the original adjudicating authority only for the limited purpose of verifying, contract-wise and transaction-wise, whether the clearances to OEM customers were effected on FOR destination basis. Where, upon such verification, the clearances are found to be on FOR destination basis, the OEMs’ premises shall be treated as the place of removal. Where any clearance is found to be on ex-factory basis, with transfer of property at the factory gate, such clearances shall be treated accordingly, after recording specific findings. Admissibility of CENVAT Credit on Outward Transportation - HELD THAT:- It is a settled legal position that where the buyer’s premises are held to be the place of removal, outward transportation up to such premises qualifies as an eligible input service, as held in CCE v. ABB Ltd. [2011 (3) TMI 248 - KARNATAKA HIGH COURT], CCE v. Vasavadatta Cements Ltd. [2010 (9) TMI 865 - KARNATAKA HIGH COURT] and Sanghi Industries Ltd. v. CCE [2019 (2) TMI 1488 - CESTAT AHMEDABAD] In this case, the Tribunal examined whether CENVAT credit on outward GTA services was admissible where cement was cleared on FOR destination basis. The Tribunal held that where freight and insurance were borne by the assessee, risk remained with the seller during the transit, and delivery was completed at the buyer’s premises, such premises would constitute the place of removal. On facts, it was found that the sale was completed only upon delivery at the buyer’s premises, and therefore credit on outward transportation was admissible. Since the place of removal itself is remanded for verification, the admissibility of CENVAT credit on outward GTA services must necessarily follow such verification. We therefore refrain from recording a final conclusion on Issue and leave the same to be decided consequentially, within the limited scope of remand. Limitation – Invocation of Extended Period - HELD THAT:- In view of the settled law laid down by the Hon’ble Supreme Court in Chemphar Drugs & Liniments [1989 (2) TMI 116 - SUPREME COURT], Pushpam Pharmaceuticals [1995 (3) TMI 100 - SUPREME COURT], Continental Foundation [2007 (8) TMI 11 - SUPREME COURT] and Uniworth Textiles [2013 (1) TMI 616 - SUPREME COURT] we hold that mere non-acceptance of the appellant’s legal interpretation cannot be equated with suppression or wilful misstatement. Consequently, invocation of the extended period of limitation cannot be sustained mechanically and must be preceded by clear and specific findings establishing intent to evade duty. Accordingly, we hold that the invocation of the extended period shall be re-examined by the adjudicating authority only in respect of those transactions, if any, which are found to be ex-factory clearances upon remand, and only after recording clear and reasoned findings of suppression or wilful misstatement in accordance with the law laid down by the Hon’ble Supreme Court. Interest and Penalty - HELD THAT:- In the present case, the appellant is a large, registered manufacturer, regularly filing statutory returns and subjected to departmental audits. The availment of CENVAT credit on outward GTA services was reflected in the records maintained by the appellant, and the dispute has arisen only on account of a different interpretation adopted by the Department during audit. In such circumstances, no element of mens rea can be presumed. The adjudicating authority, while passing the order on remand, shall therefore re-examine the issue of interest and penalty only as a consequential exercise, strictly confined to the limited scope of remand and in accordance with the legal principles set out as above. Thus, the appeals are allowed by way of remand. Issues: (i) Whether the place of removal for clearances to OEM customers is the factory gate or the OEMs' premises where supplies are on FOR destination basis; (ii) Whether CENVAT credit of service tax on outward transportation (GTA services) beyond the factory gate is admissible under Rule 2(l) of the CENVAT Credit Rules, 2004; (iii) Whether demands raised by invoking the extended period of limitation are sustainable; (iv) Whether interest and penalties imposed are legally sustainable.Issue (i): Determination of the place of removal for FOR destination clearances to OEMs.Analysis: The place of removal turns on the point where property in goods passes and the contractual allocation of risk, freight and delivery obligations. Relevant contractual documents (purchase orders, long-term supply agreements, invoices, freight and insurance clauses, transfer of risk and rejection/acceptance clauses) must be examined transaction-wise. Binding precedents recognise buyer's premises as place of removal where seller bears freight and risk and delivery completes at buyer's premises.Conclusion: The matter is remanded for limited contract-wise and transaction-wise verification to determine whether specific clearances to OEMs are on FOR destination basis (in which case the OEMs' premises shall be treated as the place of removal) or ex-factory (to be treated accordingly).Issue (ii): Admissibility of CENVAT credit on outward GTA services beyond the factory gate.Analysis: Eligibility under Rule 2(l) is inseparably linked to the place of removal. Tribunal and binding Larger Bench and High Court authorities hold there is no absolute bar to outward GTA credit; admissibility depends on factual finding that buyer's premises constitute place of removal. Contract-wise factual satisfaction is mandatory before allowing or denying credit.Conclusion: For clearances found to be FOR destination on remand, CENVAT credit on outward GTA services shall be admissible; for ex-factory clearances, eligibility shall be examined in accordance with law. The issue is left to be decided consequentially on remand.Issue (iii): Validity of invocation of the extended period of limitation.Analysis: Invocation of the extended period requires clear findings of suppression or wilful misstatement; mere difference of legal interpretation or disclosure in statutory records and returns is insufficient. Authorities require specific evidential basis for extended period where dispute is interpretational and records are maintained openly.Conclusion: Invocation of the extended period cannot be sustained mechanically. It shall be re-examined by the adjudicating authority only for transactions found to be ex-factory on remand and only after recording clear, reasoned findings of suppression or wilful misstatement as required by law. For clearances held to be FOR destination, the extended period shall not survive.Issue (iv): Liability for interest and penalty consequential to denial of credit.Analysis: Interest is compensatory and arises only if credit is found to be wrongly taken. Penalty under Section 11AC requires proof of wilful misstatement, suppression or intent to evade duty; a mere interpretational dispute in a regime of divergent views and circulars does not attract penalty without mens rea findings.Conclusion: For clearances verified as FOR destination, no interest or penalty shall be leviable. For clearances found to be ex-factory, interest and penalty shall be considered only after legal and fact-based findings on suppression or intent, confined to the scope of remand.Final Conclusion: The impugned orders are set aside and the matters are remanded to the original adjudicating authority for limited, contract-wise factual verification and consequential determination of admissibility of CENVAT credit, limitation, interest and penalty; appeals are allowed by way of remand.Ratio Decidendi: Where contractual terms and factual evidence establish that property and risk pass at the buyer's premises (FOR destination) and the seller bears freight and insurance, the buyer's premises constitute the place of removal and outward GTA services up to that place qualify as eligible input services under Rule 2(l) of the CENVAT Credit Rules, 2004; invocation of the extended period and imposition of penalty require clear, transaction-specific findings of suppression or wilful misstatement.
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