M/S Inox Air Products PVT LTD vs. The Assistant Commissioner Central Excise And Service Tax Division

Held

The Court held that the Tribunal was not justified in its findings. Firstly, for FOR destination sale contracts where ownership and risk in transit remain with the seller until acceptance by the buyer, the place of removal is the buyer's premises, not the manufacturer's. The Court relied on Supreme Court decisions in EMCO Ltd. and M/s Roofit Industries Ltd., which specifically dealt with FOR contracts and were not considered in the Ultra Tech Cements Ltd. case. Secondly, the Court noted that a CBIC circular dated 8.6.2018, which considered these decisions, held that in FOR destination sales where ownership and risk remain with the seller, the benefit is extended. This circular binds the respondents. The Court also pointed out that the Tribunal's decision in the appellant's own case by the CESTAT, Chennai, and a Larger Bench decision in M/s Ramco Cements Limited supported the appellant's contention that credit on outward transportation is eligible when freight charges are included in the taxable value. Consequently, the appeal was allowed, and the impugned orders were set aside. The issue of interest levy under Section 11AB was implicitly addressed by setting aside the demand for credit, as interest is consequential to the duty demand.

Facts

The appellant, M/s INOX Air Products Pvt. Ltd., manufactures industrial gases. They entered into agreements with customers for delivery to customer premises, with transportation costs included in the sale price. The appellant claimed CENVAT credit for service tax paid on outward freight for transporting gases from their factory to buyers' premises, treating it as an input service. Audit officers observed that the appellant had wrongly availed CENVAT credit amounting to Rs. 6,90,027/- for the period March 2011 to September 2012. Show cause notices were issued, leading to an order by the Assistant Commissioner demanding recovery of the credit along with interest and imposing a penalty. The appellant's appeals to the Commissioner (Appeals) and the CESTAT were dismissed, holding that credit on outward transportation beyond the place of removal was not admissible.

Key Issues

1. Whether, in the facts and circumstances, the Tribunal was justified in holding that the place of removal for GTA Services under a FOR (Free On Rail) sale contract is the manufacturer's premises and not the buyer's premises where the goods are sold? (Relates to the definition of 'place of removal' under the CENVAT Credit Rules, 2004). 2. Whether, in the facts and circumstances, the Tribunal was justified in holding that GTA services were received beyond the place of removal and thus not covered within the definition of 'Input Service' under Rule 2(1) of the CENVAT Credit Rules, 2004? 3. Whether, in the facts and circumstances, the Tribunal was justified in rejecting the appeal solely based on the Supreme Court judgment in CCE v. Ultra Tech Cements Ltd.? 4. Whether, in the facts and circumstances, the Tribunal was justified in upholding the levy of interest under Section 11AB of the Act? Petitioner's arguments: The place of removal is the buyer's premises as the sale concludes there. Ownership and risk remain with the appellant until delivery. They relied on CBEC circulars and Supreme Court judgments in EMCO Ltd. and M/s Roofit Industries Ltd. Revenue's arguments: The judgment does not record specific arguments made by the respondent.