Disallowance of Restoration claim of Credit availed under CCR: CESTAT directs Re-adjudication on Claim of Hindustan Coca-Cola Beverages Ltd [Read Order]

In the case of Hindustan Coca-Cola Beverages Ltd, the Mumbai bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) directed to re-adjudication on the claim of disallowance of restoration claim of credit availed under CENVAT Credit Rules, 2004 (CCR ).

The appellant challenged the order of Commissioner of Central Excise, Thane – I in which recovery of ₹ 1,75,49,220/- has been confirmed under section 11A of Central Excise Act, 1944, along with interest as applicable under section 11AB of Central Excise Act, 1944, besides imposing penalty of like amount under section 11AC of Central Excise Act, 1944 for the period from April 2006 to March 2011, seeks restoration of credit availed under CENVAT Credit Rules, 2004 that had been disallowed as ineligible.

Proceedings were initiated against the appellant about certain taxable services, procured in pursuit of their business of manufacturing ‘aerated water’, and the tax so discharged was claimed as eligible credit which was sought to be denied for reasons peculiar to each.

Accordingly, credit attributable to ‘goods transport agency service’ for outward transportation up to the place of buyer, amounting to ₹ 1,25,79,059/- was disallowed as also ₹ 6,428/- on such service for transport of inputs cleared as such, to ‘outdoor catering service’ to the extent of ₹ 19,95,382, to ‘manpower recruitment and supply agency service’ to the extent of ₹ 25,932/- and for services rendered by Mumbai International Airport Authority amounting to ₹ 29,42,220/- were enumerated as ineligible.

It was further submitted that the ‘place of removal’ was the premises of the buyer and that all the sales were effected ‘free on road (FoR)’ basis.  It was further submitted that the documents evidencing the terms of the contracts, though placed before the original authority, were disregarded.

It was evident that the issue of eligibility before 1st March 2008 stands settled thus enabling availment of credit on ‘outward transportation’ given the order of the Supreme Court in re Vasavadatta Cements Ltd. Demand for the period will not be sustained.

A two-member bench of Mr C J Mathew, Member (Technical) and Mr Ajay Sharma, Member (Judicial) observed that the original authority had failed to scrutinize the documents with due diligence.  It would, therefore, be appropriate that this be undertaken for which purpose the demand about the recovery of credit of tax paid on ‘goods transport agency service’ for the period from 1st March 2008 is set aside for a fresh determination.

Insofar as the eligibility of credit for ‘outdoor catering service’ is concerned, it would appear that one of the issues in dispute is the extent to which such cost has been recovered from employees.  The demand is concerned with is availment of credit of tax paid on charges levied by Mumbai International Airport Ltd in connection with the vending machines and kiosks installed in the airport premises being denied on the ground that the goods themselves are exempt from the duty of central excise, it would appear that the activity towards which the availment was claimed, pertains to trading which, being an exempt service, would not be entitled to the benefit of CENVAT credit of any input service.

A two-member bench of Mr C J Mathew, Member (Technical) and Mr Ajay Sharma, Member (Judicial)  observed that the impugned order had not examined the context in which the activities were undertaken by the appellant and had not examined the scope of availability of credit by CENVAT Credit Rules, 2004.

Considering the lack of detailed examination of the submissions of the appellant herein about the several heads on which CENVAT credit was directed to be recovered, the court set aside the impugned order and remanded the dispute back to the original authority for fresh determination. The appeal is accordingly allowed by way of remand. 

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