In a significant ruling in favour of Reliance Industries Ltd, the Mumbai bench of the Customs, Excise & Service Tax Appellate Tribunal(CESTAT) held that CENVAT Credit allowable on tax paid towards utilization of Goods Transport Agency (GTA) service on the period before amendment on Rule 2(I) OF CENVAT Credit Rules, 2004 (CCR).
The Revenue filed an appeal against the success of the appeal of M/s Reliance Industries Ltd before the first appellate authority about the recovery of CENVAT credit, ordered by the original authority for the period from January 2005 to March 2008 while adjudicating five show cause notices for different establishments of the assessee on the charge that CENVAT credit of ₹ 1,56,87,484/-, being tax paid towards utilization of ‘goods transport agency service’, was ineligible.
The sole contention in the grounds of appeal is that the conditions prescribed for eligibility to avail such credit, in the circular of Central Board of Excise and Customs (CBEC) no. 97/8/2007-ST dated 23rd August 2007, had not been evidenced as having been complied with.
The revenue contended that, as per the circular, the assessee needed to establish that ownership of goods remained with them, that the risk of loss of goods devolved on the assessee and that transport charges up to the premise of the customers are an integral part of the value of the goods on which excise duty had been discharged.
Further pointed out that the original authority had confirmed the demands in the show cause notices owing to the failure of the assessee to demonstrate compliance with these. The issue was on the definition of ‘input service’ in rule 2(l) of CENVAT Credit Rules, 2004, before the amendment effected in 2008, wherein the outward transportation from the ‘place of removal’ was included.
It was viewed that the expression used in the aforesaid Rule is “from the place of removal”. It has to be from the place of removal up to a certain point. Therefore, tax paid on the transportation of the final product from the place of removal up to the first point, whether it is a depot or the customer, has to be allowed.
It was evident that the entire period of dispute in this appeal pertains to the period of pre-amended rule 2(l) of CENVAT Credit Rules, 2004. It was incumbent upon the central excise authorities to establish that the relevant conditions in the said circular had not been complied with.
A two-member bench of Mr C J Mathew, Member (Technical) and Mr Ajay Sharma, Member (Judicial) held that “It is not open to the show cause notice issuing authority or the adjudicating authority to level an allegation without evidence in support of ineligibility for shifting the onus of establishing fulfilment of the conditions on the assessee. “
The CESTAT held that the appeal of Revenue lacks merits and was dismissed.
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