CENVAT - Rule 2(l) - Whether credit of ST paid on outward freight in respect of MV parts cleared from factory and assessed in terms of s.4A is available w.e.f 01/04/2008 - since in appellant's own case in r/o Hinjewadi unit credit has been extended, same benefit cannot be denied to Chakan unit - stay granted: CESTAT
By TIOL News Service
MUMBAI, OCT 25, 2013: CENVAT Credit of service tax paid on outward freight services amounting to Rs.1,89,85,296/- for the period January 2010 to June 2011 and Rs.84,03,102/- for the period July 2011 to March, 2012 have been denied by the CCE, Pune-I under two O-in-O's and, therefore, the appellant is before the CESTAT.
The appellant are manufacturers of M.V parts (Ch. 87) and are discharging excise duty on the basis of Maximum Retail Price as envisaged u/s 4A of the CEA, 1944. The said MRP includes outward freight charges amongst others.
Since as per the Rule 2(l) of the CCR, 2004, "input service" includes outward freight only up to the place of removal and the place of removal is the factory, the department was of the view that the appellant is not eligible for the credit of service tax paid on outward freight incurred beyond the place of removal and accordingly sought to deny the credit availed by the appellant on such outward freight.
As mentioned since the CENVAT credit was denied along with imposition of interest and penalties, the appellant is before the CESTAT.
The appellant submitted -
+ As per the definition of ‘retail price' the same includes, inter alia, freight and transport charges and the said price is the price charged to the ultimate consumer, the outward freight is an integral part of the price charged to the consumer and excise duty liability has been discharged on this price. Inasmuch as the place of removal should be considered as the customer's premises and, therefore, they are rightly entitled for the credit of service tax paid on outward freight services.
+ Reliance is also placed on the CBEC circular No.97/8/2007-ST dated 23.8.2007 to support their contention.
+ The demand is time barred as the fact of availing CENVAT Credit on outward transportation was made known to the department in the monthly returns filed by the appellant.
+ In respect of their own unit at Hinjewadi, a similar demand for an amount of Rs. 1,14,82,273/- was made for the period January 2007 to January 2011 on identical grounds and the proceedings initiated were dropped vide O-i-O No. 15/CEX/2012 dated 23/4/2012 by the same adjudicating authority and the said decision was accepted in review by the Committee of Chief Commissioners and the said decision has become final. Therefore, a different treatment cannot be accorded to another unit of the appellant.
The Revenue representative submitted that w.e.f. 01/04/2008, the input service definition was amended as regards the outward freight and the words "outward freight from the place of removal" was substituted by the words "outward freight up to the place of removal"; that the purpose and object of this amendment was to restrict the eligibility to credit to freight charges incurred up to the place of removal. In the case of motor vehicle parts sold on retail sale price basis, the place of removal remains the factory of manufacture and only the basis of valuation is the maximum retail price and not the transaction value. Reliance is placed on the High Court decision in ABB Ltd. - (2011-TIOL-395-HC-KAR-ST) where it is held that the benefit of CENVAT credit on outward freight services beyond the place of removal would be available only for the period prior to 01/04/2008 and not afterwards, in view of the amendment made in the CENVAT Credit Rules. Therefore, the appellant be put to terms at the interim stage.
The Bench observed -
"5.1 Though there is some merit in the Revenue's contention that w.e.f. 1-4-2008, in view of the amendment made in the definition of input service relating to outward freight and the decision of the hon'ble High Court of Karnataka in the ABB case cited supra, CENVAT credit would not be available in respect of outward freight services, in appellant's own case in respect of their Hinjewadi Unit, the benefit of credit on outward freight services has been extended vide O-i-O NO. 15/CEX/2012 dated 23/4/2012 for the period after 1-4-2008. Since the said order has been accepted by the Revenue and no appeal appears to have been filed, the same benefit cannot be denied to the Chakan unit of the appellant. Therefore, without going into the other contentions raised by the appellant, we are of the view that the appellant has made out a prima facie case in their favour for interim relief…."
In fine, the Bench granted unconditional waiver from pre-deposit of the dues adjudged against the appellant in the impugned orders and stayed recovery.
(See 2013-TIOL-1580-CESTAT-MUM)
