2016 (9) TMI 100 - AT - Service Tax

Assessee wins CENVAT Credit on freight charges for biscuit transport. Revenue appeals dismissed.

The Tribunal concluded that the Assessee is eligible for CENVAT Credit on Service Tax paid on outward freight charges for transporting biscuits from the ... Admissibility of CENVAT credit on outward freight (GTA) for job-workers - admissibility of CENVAT credit on inward freight and input services - interpretation of the term 'input service' prior to amendment w.e.f. 01.04.2008 - place of removal in job work arrangements - effect of principal manufacturer's authorization under Notification No.36/2001 CE(NT)Admissibility of CENVAT credit on outward freight (GTA) for job-workers - interpretation of the term 'input service' prior to amendment w.e.f. 01.04.2008 - effect of principal manufacturer's authorization under Notification No.36/2001 CE(NT) - CENVAT credit on Service Tax paid on outward freight (GTA) for transporting biscuits from the job-worker's factory to the principal manufacturer's depots is admissible to the job-worker for the period prior to 01.04.2008. - HELD THAT: - The Tribunal found an existing contractual arrangement and an authorization dated 15.09.2001 by the principal manufacturer permitting the assessee to manufacture, pack and deliver biscuits to various depots and to discharge excise and related formalities. Applying the pre 01.04.2008 definition of 'input service,' outward transportation of finished products up to the place of removal (including delivery to the principal's depots) fell within 'means' part of the definition and thus qualified as an input service. Reliance was placed on this Tribunal's decision in M.P. Biscuits and on the Gujarat High Court's reasoning in Parth Polywoven that the expression 'means and includes' must be read expansively and that outward transportation used for clearance to the purchaser's premises prior to 01.04.2008 was covered. In these facts the assessee had paid Service Tax on such GTA services and was therefore entitled to CENVAT credit under the Cenvat Credit Rules applicable during the relevant period. [Paras 7, 8, 9]Allowed - CENVAT credit on Service Tax paid on outward freight to the principal's depots is admissible for the stated period.Place of removal in job work arrangements - place of removal and post amendment jurisprudence - The decision in Kohinoor Biscuit Products (treating place of removal as factory gate for later periods) is not applicable to the present appeals which relate to a period prior to the amendment of the definition of 'input service'. - HELD THAT: - The Tribunal rejected Revenue's reliance on the Kohinoor Biscuit Products decision because that decision related to a later period (post amendment effective 01.04.2008) and rested on precedents (Ultratech) which were not followed by the High Court. The Tribunal held that the presumption that place of removal is the factory gate for goods chargeable to duty under Section 4A cannot be applied to the facts and period here; place of removal must be determined on facts and, for the relevant pre amendment period, outward transport to the purchaser's premises could be an input service. [Paras 8]Kohinoor decision inapplicable to the facts and period of these appeals; reliance on it is rejected.Admissibility of CENVAT credit on inward freight and input services - effect of remand in light of the ABB Ltd. Larger Bench decision - CENVAT credit on Service Tax paid on inward freight (and on outward freight) was correctly allowed by the Commissioner (Appeals) after remand; Revenue's appeals against that allowance are dismissed. - HELD THAT: - Revenue's appeals had been remanded for reconsideration in light of the Larger Bench decision in ABB Ltd.; upon reconsideration the Commissioner (Appeals) allowed the CENVAT credit on inward and outward freight for the relevant period. The Tribunal, applying the relevant precedents and the factual finding of contractual authorization, sustained the Commissioner (Appeals) decision and found no merit in Revenue's challenge to the allowance of such credit. [Paras 3, 4, 7, 10]Revenue appeals dismissed; Commissioner (Appeals) order allowing CENVAT credit on inward and outward freight upheld.Final Conclusion: For the period August 2005 to February 2007 (pre amendment), the Tribunal allowed the three appeals filed by the assessee and dismissed the two appeals filed by the Revenue, holding that outward and inward freight (GTA) Service Tax paid by the job worker under the contractual authorization of the principal manufacturer qualified as input service and entitlement to CENVAT credit was established. Issues Involved:1. Eligibility of CENVAT Credit on Service Tax paid on outward freight charges (GTA services) for transporting manufactured biscuits from the factory to the depots of M/s Parle Products Pvt. Ltd.2. Compliance with the provisions of Section 35F of the Central Excise Act, 1944 in the context of the appeals filed by the Revenue.Detailed Analysis:1. Eligibility of CENVAT Credit on Service Tax Paid on Outward Freight Charges:The primary issue revolves around whether the Assessee, a job worker for M/s Parle Products Pvt. Ltd (PPPL), is entitled to CENVAT Credit on the Service Tax paid on outward freight charges for transporting manufactured biscuits from their factory to PPPL's depots.Arguments by the Assessee:- The Assessee argued that under an agreement with PPPL, they were required to deliver manufactured biscuits to various depots of PPPL and pay excise duty on the price declared by PPPL.- The Assessee contended that the Commissioner (Appeals) erred in denying CENVAT Credit on Service Tax paid on freight charges up to PPPL's depots, asserting that the issue is covered by precedents such as M.P. Biscuits Pvt. Ltd Vs CCE Allahabad and CCE Indore Vs Dhananjay Confectionary (P) Ltd.- The Assessee highlighted that the period in question (August 2005 to February 2007) was prior to the amendment to the definition of input service under Rule 2(l) of the CENVAT Credit Rules, 2004, effective from 01.04.2008. Therefore, Service Tax paid on outward freight to PPPL's depots should be eligible for CENVAT Credit, supported by the Gujarat High Court's decision in CCE Vs Parth Poly Wooven Pvt. Ltd.Arguments by the Revenue:- The Revenue argued that the factory gate is the place of removal, and thus Service Tax paid on outward freight from the factory gate to PPPL's depots is not eligible for CENVAT Credit, referencing the Tribunal's decision in Kohinoor Biscuit Products Vs CCE Noida.Tribunal's Findings:- The Tribunal noted that the Assessee had an agreement with PPPL to manufacture and transport biscuits to various depots, and this arrangement was communicated to the Central Excise authorities.- The Tribunal referred to the judgment in M.P. Biscuits Pvt. Ltd., which established that outward transportation up to the place of removal falls within the definition of input service.- The Tribunal found that the duty paid on input raw materials and packaging materials by PPPL, which were converted into biscuits by the Assessee, was availed as credit without dispute.- The Tribunal rejected the Revenue's reliance on Kohinoor Biscuits, noting that the judgment was based on a period after the amendment to the definition of input service and was not accepted by the Chhattisgarh High Court in Ultratech Cement Ltd. Vs. Commissioner of Central Excise, Raipur.- The Tribunal also cited the Gujarat High Court's judgment in Parth Polywoven Pvt. Ltd., affirming that CENVAT Credit on GTA service (outward freight) from the place of removal to the purchaser's premises prior to 01.04.2008 was admissible.Conclusion:The Tribunal concluded that the Assessee is eligible for CENVAT Credit on Service Tax paid on outward freight charges for transporting biscuits from the factory to PPPL's depots. Consequently, the three appeals filed by the Assessee were allowed.2. Compliance with Provisions of Section 35F:The second issue pertains to the compliance with the provisions of Section 35F of the Central Excise Act, 1944, in the context of the appeals filed by the Revenue.Background:- The Revenue's appeals were based on the rejection of demands by the Adjudicating Authority due to the Assessee's non-compliance with Section 35F provisions.- The Tribunal had previously remanded the appeals to the Commissioner (Appeals) for reconsideration based on the Larger Bench decision in ABB Ltd. Vs. Commissioner of C.E & S.T Bangalore.- Upon reconsideration, the Commissioner (Appeals) decided in favor of the Assessee, setting aside the Adjudicating Authority's orders, prompting the Revenue's appeals.Tribunal's Findings:- The Tribunal found that the Commissioner (Appeals) had correctly analyzed the evidence and principles laid down in the ABB Ltd. case, allowing CENVAT Credit on Service Tax paid on both inward and outward freight during the relevant period.- The Tribunal dismissed the Revenue's contention that there was no arrangement between the Assessee and PPPL to discharge Service Tax on GTA services, affirming that the specific agreement was communicated to the Range Superintendent.Conclusion:The Tribunal dismissed the two appeals filed by the Revenue, upholding the decision of the Commissioner (Appeals) in favor of the Assessee.Final Disposition:All five appeals were disposed of as follows:- The three appeals filed by the Assessee were allowed.- The two appeals filed by the Revenue were dismissed.Pronounced in Court on 31.08.2016.