Denial of Cenvat on GTA service just because duty on goods been paid on assessable value determined u/s. 4A of Excise Act
CASE LAWS DETAILS
DECIDED BY: CESTAT, PRINCIPAL BENCH, NEW DELHI, IN THE CASE OF: LG Electronics (India) Pvt. Ltd. v. CCE, APPEAL NO: Appeal No. E/536/2009, DECIDED ON April 12, 2010
On going through the CCR, 2004, we do not find any provision which prohibits input duty credit, if duty on the finished products has been paid at the specific rates or at ad valorem rates on the tariff values fixed under section 3(2) of Central Excise Act or on the assessable value determined under MRP of section 4A of the Central Excise Act. It a service is covered by the definition of Input service’ and the finished product is not `exempted goods’, the credit of service tax paid on such input service has to be allowed irrespective of whether the duty on the finished product has been paid at a specific rate or at ad valorem rate on the assessable value determined under section 4 or under section 4A or on tariff value fixed under section 3(2) of the Excise Act, as so long as the finished product is subjected to duty and the credit of the input stage duty is allowed, the tax will retain the character of value added tax. The reason for this is that while ideally in a tax system with character of VAT, the input goods/services as well as finished product must be subjected to tax at a uniform ad valorem rate on their sale value in which case, the net tax collected after allowing credit of input stage duty will be exactly the tax on the value addition, in practice, it is not always possible, but even if the input goods/services and the finished products are taxed at different ad valorem rates or at specific rates, once the input stage duty credit is allowed, on overall basis the net tax collected would be more or less the tax on value addition. Therefore for allowing credit of tax paid on input goods/service used in or in relation to manufacture of a finished product, what is relevant is as to whether the items in respect of which input duty credit is being claimed are covered by the definition of “input” or “input service” and finished product is chargeable to duty for allowing the credit of duty paid on input goods and/or of service tax paid on input services it is not relevant as to whether the duty on the finished product has been paid at specific rate or at ad valorem rate and of at ad valorem rate whether on the assessable value determined under section 4 or section 4A of the Excise Act or on tariff value fixed under section 3(2). We, therefore, hold that the Cenvat credit of service tax paid on the GTA service availed for transportation of the goods up to the customer’s door steps in case of sales on FOR destination basis cannot be denied just because the duty on the goods has been paid on the assessable value determined under section 4A i.e. on the value determined with reference to declared MRP minus abatement.
Therefore, in this case, if as claimed by the Appellant, their sales are on FOR destination basis and the three conditions in this regard mentioned in the Board’s Circular dated 23-8-07 are satisfied, that is, ownership and property in the goods remains with the appellant till delivery of the goods in acceptable condition to the customers at their doorsteps, the Appellant bear the risk of loss or damage to goods during transit up to the destination and freight charges are integral part of the price of the goods, the GTA service availed for transportation of the goods up to the customer’s door steps would be covered by definition of `input service’ and would be eligible for Cenvat credit. However, we find that in this case, firstly, the Commissioner has decided the matter ex parte without granting personal hearing and secondly the appellant’s claim that their sales were on FOR destination basis has not been examined at all. Therefore, for this purpose, the matter will have to be remanded to the Commissioner for giving his specific findings after hearing the Appellant and, if there is evidence on record that the Appellant’s sales were on FOR destination basis satisfying the conditions in this regard in the above-mentioned Circular dated 23-8-07 of the Board, the Cenvat credit of service tax paid on the GTA service availed for transportation of the goods up to the customer’s premises would have to be allowed.