TaxTMI 
TaxTMI 
2026 (1) TMI 1511
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....ed CENVAT credit of excise duty paid on inputs and capital goods and also of service tax paid on input services, including Goods Transport Agency (GTA) services, under the provisions of the CENVAT Credit Rules, 2004, and utilised such credit for payment of duty on finished goods. 1.3 The appellant cleared tyres through two channels, namely (i) to OEM customers and (ii) to the replacement market through depots and redistribution centres. The present disputes relate exclusively to clearances made to OEMs. According to the appellant, such clearances were effected under purchase orders and long-term supply agreements on FOR destination basis, wherein ownership and risk in the goods remained with the appellant till delivery at the OEMs' premises, which was claimed to be the "place of removal". 1.4 For the period September 2010 to June 2015, departmental audit objected to the availment of CENVAT credit on outward freight beyond the factory gate. Consequently, Show Cause Notice No. 21/2015 dated 24.07.2015 was issued proposing recovery of CENVAT credit amounting to Rs.2,37,60,590/-, along with interest under Rule 14 of the CENVAT Credit Rules, 2004 read with Sec....
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....ions of High Courts and Tribunals holding that where sale is on FOR basis and property in goods passes at the buyer's premises, outward transportation up to such place qualifies as an eligible input service. The appellant emphasizes that several Chennai Bench decisions have consistently taken this view in identical circumstances involving OEM supplies. 4.4 On limitation, it was submitted that the entire demand is unsustainable as the issue involved is one of interpretation of law, on which there existed divergent views and multiple circulars issued by the Board from time to time. The appellant contends that all relevant facts were duly disclosed in statutory records, returns and during audits, and therefore there was neither suppression nor wilful misstatement. Hence, invocation of the extended period is contrary to settled law. 4.5 It was further submitted that once the demand itself fails on merits or limitation, the levy of interest and imposition of penalty cannot survive. Even otherwise, there was no intent to evade duty, and the appellant's conduct was bona fide, supported by judicial precedents and departmental circulars. 5.1 The Ld. Authorized Representative for th....
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.... with the CENVAT Credit Rules, 2004 are legally sustainable. 8. We take up the issues in seriatim. ISSUE No. (i): Determination of the "Place of Removal" 9.1 The appellant submitted that the determination of "place of removal" is not a mechanical or presumptive exercise, but one that must be undertaken with reference to the intention of the parties, contractual terms, and the point at which property in goods passes, as mandated by Section 4(3)(c) of the Central Excise Act, 1944. 9.2 It was contended that the purchase orders executed with OEM customers were FOR destination contracts, under which: - i. freight and insurance were borne by the appellant; ii. delivery was required at the OEMs' factory premises; iii. risk of loss or damage remained with the appellant during transit; and iv. the OEMs had an explicit contractual right to reject the goods upon delivery. 9.3 It is further argued that excise duty was discharged on the value which is inclusive of freight, thereby evidencing that transportation was an integral part of the sale transaction and not a post-sale activity. 9.4 Whereas the Revenue adverted to that the factory gate....
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....asserted that clearances to OEM customers were effected under FOR destination contracts. However, we find that the adjudicating authority has not undertaken a contract-wise examination to verify whether, in each case: i. freight and insurance were borne by the appellant; ii. risk remained with the appellant during the transit; iii. delivery obligations were discharged only at the OEMs' premises; and iv. the OEMs had contractual rights of rejection upon delivery. 9.11 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. 9.12 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. 9.13 The adjudicating authority shall examine, inter alia: - a. purchase orders/long-term supply agreements b. invoices raised on OEMs c. freight and insurance clauses d. terms relating to transfe....
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....We further find that the appellant has placed reliance on a consistent line of Tribunal decisions dealing with OEM supplies effected on FOR destination basis, wherein outward transportation up to the buyer's premises was held to be an eligible input service, subject to satisfaction of factual requirements relating to the place of removal. We briefly discuss the ratio of each decision and the inferences that flow therefrom. Sanghi Industries Ltd. v. CCE, 2019 (369) ELT 1424 (Tri.-Ahmd) 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. Significantly, this decision was affirmed by the Hon'ble Gujarat High Court, thereby lending legally authoritative weight to the principle that outward GTA....
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....atory. (e) The ratios laid down in Sanghi Industries, Ramco Cements (LB) and Bharat Fritz Werner (Kar HC), read with Roofit Industries Ltd. (SC), are binding on us. 10.11 In view of the binding nature of the above decisions, we are constrained to remand the matter for limited factual verification, rather than record a blanket allowance or denial of credit. 10.12 However, since the place of removal itself is remanded for verification, the admissibility of CENVAT credit on outward GTA services must necessarily follow such verification. 10.13 Accordingly: i. For FOR destination clearances, CENVAT credit on outward GTA services shall be admissible. ii. For ex-factory clearances, eligibility shall be examined in accordance with law. 10.14 We therefore refrain from recording a final conclusion on Issue No. (ii) and leave the same to be decided consequentially, within the limited scope of remand. ISSUE No. (iii): Limitation - Invocation of Extended Period 11.1 The appellant submitted that the extended period of limitation has been invoked mechanically, without any evidence of wilful misstatement, suppression of facts or intent to evade duty. It....
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....after recording clear and reasoned findings of suppression or wilful misstatement in accordance with the law laid down by the Hon'ble Supreme Court. 11.7 Penalty under Section 11AC of the Central Excise Act, 1944, if any, shall be examined separately under Issue No. (iv). 11.8 For all clearances which are held to be FOR destination sales, the extended period, interest and penalty shall not survive. ISSUE No. (iv): Interest and Penalty 12.1 We find that the demands of interest and imposition of penalty in the impugned orders are entirely consequential to the denial of CENVAT credit on outward transportation and are premised on the allegation that the appellant had wrongly availed such credit by treating the OEMs' premises as the place of removal. Once the core issue relating to determination of place of removal is remanded for contract-wise verification, the liability to interest and penalty cannot survive automatically and must necessarily abide by the outcome of such verification. 12.2 We note that interest under Rule 14 of the CENVAT Credit Rules, 2004 read with Section 11AA of the Central Excise Act, 1944 is compensatory in nature and becomes payable only when cre....