2013 (1) TMI 471 - AT - Central Excise

Eligibility for Cenvat credit - service tax paid on godown rental and on outward freight for transportation of the finished goods upto the customer s premises - Held that - The department accepts that the appellant has paid central excise duty on the FOR destination price i.e. the factory gate price plus freight charges. According to the department the sales are not on FOR destination basis as in the invoices, there is no reference to the insurance charges. Thus just because the appellant did not insure the goods during transit, it cannot be inferred that the risk of loss of goods, or damage to the goods during transit was not of the appellant, when the invoices mentions that the sales are on FOR destination basis and duty had been paid on the price which includes the freight charges. That it is the customer s premises which has to be treated as the place of removal and the appellant would be eligible for Cenvat credit of the service tax paid on outward freight and as such this Cenvat credit has been wrongly denied. Cenvat credit in respect of godown rental - Since this service had been availed prior to removal of the goods in as much as the place of removal is the customer s premises, the appellant would be eligible for Cenvat credit for this service, more so, when this service has also been availed for storage of the raw material - the impugned order of denial of CENVAT credit is not correct & is set aside - in favour of assessee.

Summary

Issues:
1. Eligibility for Cenvat credit of service tax paid on godown rental and outward freight for transportation of finished goods.
2. Interpretation of sales on FOR destination basis.
3. Time limitation for issuing show cause notice.

Analysis:
1. The appellant, a manufacturer of automobile parts, claimed Cenvat credit for service tax paid on godown rental and outward freight for transportation of finished goods. The dispute revolved around whether the appellant was eligible for such credit during 2006-2007. The department issued a show cause notice denying the credit, citing that the appellant's sales were not on FOR destination basis as per the criteria outlined in a Board Circular. The Additional Commissioner upheld the denial, invoking an extended period under Section 11A (1) and imposed a penalty. On appeal, the Commissioner (Appeals) affirmed the decision, leading to the current appeal.

2. The appellant contended that all their sales were on FOR destination basis, meeting the criteria specified in the Board Circular. They argued that the customer's premises should be considered the place of removal, making all services availed up to that point eligible for Cenvat credit. The appellant's position was supported by the fact that the sales invoices indicated FOR destination sales, with freight charges included in the price. The appellant's failure to insure the goods during transit was not deemed sufficient to negate their assumption of risk, especially when excise duty was paid on the price inclusive of freight charges.

3. The Tribunal analyzed the conditions for treating a sale as FOR destination sale as per the Board Circular. It was established that if ownership and risk of goods during transit remained with the supplier, and freight was an integral part of the price up to the customer's premises, the sale could be considered FOR destination. In this case, since the appellant had paid excise duty on the FOR destination price and had not shifted the risk during transit, the Tribunal concluded that the customer's premises should be recognized as the place of removal. Consequently, the appellant was deemed eligible for Cenvat credit on outward freight and godown rental services.

In conclusion, the Tribunal allowed the appeal, setting aside the previous orders and ruling in favor of the appellant's eligibility for Cenvat credit on the disputed services.