Commissioner Of Central Goodsandser Tax vs. Arl Infratech LTD

Held

The High Court held that the Tribunal's judgment could not be sustained in law in light of the amended definition of 'input service' effective from 01.03.2008 and the Supreme Court's decision in Ultra Tech Cement Ltd. The demand was liable to be revived. However, considering the totality of circumstances, including the issues of penalty and limitation, the entire matter was remanded back to the Tribunal. The Tribunal was directed to consider the questions of penalty and limitation, and decide both issues after hearing both parties, for re-quantification of the demand. The Court explicitly stated that it had not expressed any opinion on the merits of the case, including the questions of penalty and limitation. The appeal and cross-objection were allowed to the extent of setting aside the Tribunal's judgment and remanding the matter.

Facts

The Revenue (Commissioner of Central Goods and Service Tax & Central Excise, Jaipur) appealed a judgment of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) that set aside an order-in-original passed by the Commissioner, Central Excise, Jaipur. The respondent-assessee, ARL Infratech Limited, a manufacturer of asbestos cement products, had availed CENVAT credit for service tax paid on outward transportation of goods from their factory gate to buyer premises for the period May 2010 to December 2012, amounting to Rs. 73,58,446/-. The Adjudicating Authority disallowed this credit, charged interest, and imposed a penalty. The CESTAT allowed the assessee's appeal, leading to the Revenue's appeal before the High Court. The assessee also filed a cross-objection regarding the issue of limitation, which the Tribunal had not decided.

Key Issues

1. Whether the CESTAT was correct in holding that CENVAT credit of Goods Transport Agency services for outward transportation of goods beyond the place of removal is eligible as 'input service' under Rule 2(l) of the CENVAT Credit Rules, 2004, considering the amendment effective from 01.03.2008? (Question of law) 2. Whether the Tribunal was right in not considering or deciding the ground of limitation raised by the assessee in its appeal memo? (Question of mixed law and fact) Petitioner's (Revenue) arguments: The Tribunal erred by not considering the amendment to the definition of 'input service' effective from 01.03.2008, which substituted 'clearance of final products from the place of removal' with 'clearance of final products upto the place of removal'. This amendment, along with the Supreme Court's judgment in Commissioner of Central Excise Service Tax Vs. Ultra Tech Cement Ltd., supports the revival of the demand and imposition of penalty. The Revenue also cited several Supreme Court and High Court judgments on limitation and penalty. Respondent's (Assessee) arguments: Similar issues for previous periods were decided in favour of the assessee by the High Court. The show cause notice dated 03.07.2013 for the period May 2010 to December 2012 is hit by limitation under Section 11A of the Act for the period May 2010 to April 2012. The Supreme Court's judgment in Ultra Tech Cement Ltd. did not consider important aspects and requires reconsideration. Penalty should not arise if the main demand is set aside.