2017 (8) TMI 147 - AT - Central Excise

Tribunal emphasizes sale agreements in determining admissibility of CENVAT Credit on GTA services

Unique Welding Products Pvt. Ltd. Versus Commissioner of Central Excise, Customs and Service Tax-VADODARA-I

The Tribunal remanded the appeals to determine the admissibility of CENVAT Credit on GTA services based on the place of removal, emphasizing the ... Interpretation of statute - meaning and scope of the expression place of removal employed in the definition of input service under Rule 2(l)of CCR,2004, in the context of admissibility of CENVAT Credit on outward freight (GTA service), when the manufactured goods are cleared and delivered at the place of buyer - Held that: - by virtue of Rule 2(t) of CENVAT Credit Rules, 2004 the meaning of expression not defined therein has been borrowed from the Central Excise Act and the Rules made thereunder, but it has to be read in the context in which it has been used - It is well settled that all statutory definitions or abbreviations must be read subject to the qualification variously expressed in the definition clauses which created them and it may be that even where the definition is exhaustive inasmuch as the word defined is said to mean a certain thing, it is possible for the word to have a somewhat different meaning in different sections of the Act depending upon the subject or context. That is why all definitions in statutes generally begin with the qualifying words, similar to the words used in the present case, namely unless there is anything repugnant in the subject or context. The CENVAT Credit Rules extends credit of the duty/tax paid on various services incurred in or in relation to manufacture of goods, enumerated under the definition of input service which includes outward transportation up to the place of removal - Even though the meaning of place of removal has to be considered to be factory gate, however, the Courts while interpreting the meaning of input service laid emphasis on the condition of sale so as to ascertain whether the services rendered by the assessee was in relation to delivery of the manufactured/finished goods at the place of the buyer. Ascertainment of place of removal - two circulars of the Board namely 37B order no 59/1/2003, dated 3-3-2003 and Circular No. 97/8/2007, dated 23-8-2007 - Held that: - no specific finding has been recorded analyzing the evidences as to whether sale of the manufactured goods is at the factory gate or at the premises of the buyer as per the agreement for sale, purchase Order, invoice etc. Thus, all these appeals need to be remanded to the original authority to examine the said aspect and then consider the eligibility of CENVAT Credit on outward freight (GTA services) by ascertaining the place of sale in the light of above observation and the circulars issued by the Board. The impugned orders are set aside and the appeals are remanded to the adjudicating authority - Appeal allowed by way of remand. Issues Involved:1. Admissibility of CENVAT Credit on GTA services prior to 01.04.2008.2. Admissibility of CENVAT Credit on GTA services after 01.04.2008.3. Interpretation of 'place of removal' under CENVAT Credit Rules, 2004.4. Applicability of Supreme Court judgment in Ispat Industries case.5. Binding nature of CBEC circulars on the definition of 'place of removal.'Detailed Analysis:1. Admissibility of CENVAT Credit on GTA services prior to 01.04.2008:The Tribunal noted that the issue of CENVAT Credit on GTA services for the period prior to 01.04.2008 is settled by various High Courts, including the jurisdictional Gujarat High Court in the case of CCE Vs Parth Poly Woven Pvt. Ltd. The credit was deemed admissible based on the interpretation that the place of removal could extend to the buyer's premises if the sale conditions so required.2. Admissibility of CENVAT Credit on GTA services after 01.04.2008:For the period after 01.04.2008, the Tribunal observed that the determination of the place of removal is crucial. The Tribunal emphasized that the eligibility of CENVAT Credit on outward freight (GTA services) depends on whether the sale was at the factory gate or at the buyer's premises, based on the agreement of sale. The Tribunal referred to various cases where the matter was remanded to ascertain the actual place of removal based on sale agreements.3. Interpretation of 'place of removal' under CENVAT Credit Rules, 2004:The Tribunal discussed that the term 'place of removal' is not defined under the CENVAT Credit Rules, 2004, but its meaning is borrowed from Section 4(4)(c) of the Central Excise Act, 1944. The Tribunal highlighted that the interpretation of 'place of removal' should be context-specific and not mechanically applied. The Tribunal acknowledged the Supreme Court's interpretation in Ispat Industries but emphasized that the context of CENVAT Credit Rules is different, focusing on the avoidance of cascading effects or double taxation.4. Applicability of Supreme Court judgment in Ispat Industries case:The Tribunal noted that the Supreme Court in Ispat Industries dealt with the determination of assessable value under Section 4 of the Central Excise Act, 1944, and held that the place of removal could not be the buyer's premises. However, the Tribunal argued that this interpretation should not be mechanically applied to the CENVAT Credit Rules, which serve a different purpose. The Tribunal emphasized a more liberal interpretation of 'place of removal' in the context of extending CENVAT Credit on outward freight.5. Binding nature of CBEC circulars on the definition of 'place of removal':The Tribunal discussed the binding nature of CBEC circulars, which clarified the meaning of 'place of removal' and supported the eligibility of CENVAT Credit on outward freight when the sale was at the buyer's premises. The Tribunal referred to Circular No. 988/12/2014-CX, dated 20-10-2014, which reiterated that the place of removal should be determined based on the terms of the sale contract. The Tribunal concluded that these circulars are binding on the Revenue and should be given due importance in implementing the CENVAT provisions.Conclusion:The Tribunal set aside the impugned orders and remanded the appeals to the adjudicating authority to examine whether the sale of manufactured goods was at the factory gate or at the buyer's premises based on the agreement for sale, purchase order, and invoice. The Tribunal emphasized that a reasonable opportunity of hearing should be allowed to the appellants, and all issues are kept open for consideration. The appeals were disposed of accordingly.