Summary
The Supreme Court disallowed CENVAT credit for transport from the place of removal to buyers’ premises for the January–June 2010 period. The amended input-service definition restricted clearance-related credit to services used “up to” the place of removal, replacing the earlier wording “from”. The 2007 Board circular could not extend credit contrary to the amended rule. Revenue’s appeal was allowed and the original assessment order, including its recovery directions, was restored.
Issues
- Whether the amended input-service definition allowed credit for outward transport beyond the place of removal in 2010.
Provisions considered
- Rule 2(l), as applicable to January–June 2010, CENVAT Credit Rules, 2004The change from “from” to “up to” the place of removal terminated entitlement at that point and excluded the transport at issue. (¶¶ 5, 6, 7, 11, 12, 13)
- Section 4, definition of place of removal, Central Excise Act, 1944The definition and circular conditions had to be considered in the context of the amended limit; the circular could not override the rule. (¶¶ 10, 11, 12)
Held
- The dispute concerned January–June 2010 and therefore the amended definition. Unlike the earlier “from” wording considered in Vasavadatta Cements, “up to” marked the terminating point of eligible transport. Credit for the respondent’s onward transport from the place of removal to customers was inadmissible. (¶¶ 1, 5, 6, 7, 13)
- The 23 August 2007 circular addressed the unamended regime. Satisfaction of its conditions about retained ownership, transit risk and freight did not authorize extending credit contrary to the subsequent rule. Applying it that way would defeat the amendment. (¶¶ 8, 9, 10, 11, 12)
- The High Court’s decision sustaining credit was set aside and the Order-in-Original of 22 August 2011 restored. That original order demanded the credit and interest and imposed the specified penalties; the operative restoration was not merely a remand for fresh assessment. (¶¶ 2, 13)
Result
Revenue appeal allowed; High Court judgment set aside and Order-in-Original dated 22 August 2011 restored. Outward-transport credit in issue disallowed.