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2024 (4) TMI 817
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.... appellant claims, and which fact is not disputed by the department, that the appellant sells its final products to the customers on FOR destination basis and consequently remains responsible for getting the goods delivered till the premises of the buyers. The appellant further claims that it bears the risk of loss while the goods are in transit and the property in the goods passes from the seller to the buyer at the customers place when the sale takes place. It is for this reason that the appellant claims that it availed CENVAT credit of service tax paid on such GTA services for outward transportation of the final products from the factory or the depots of the appellant to the premises of the buyer. 3. A show cause notice for the period from January 2008 to September 2008 was issued the appellant proposing to recover the alleged inadmissible CENVAT credit amounting to Rs. 28,61,265/- under rule 14 of the 2004 Rules read with section 11A of the Central Excise Act, 1944 [the Central Excise Act] with interest and penalty on the ground that the 'place of removal' in the present case would be the factory gate of the appellant and so CENVAT credit on outward transportation of goods f....
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....CR, 2004. 6.7 Further, it is noticed that the definition of "input service" was amended w.e.f. 01.04.2008 vide Notification No. 10/2008-CE(NT) dated 01.03.2008 whereby the aforesaid expression "from the place of removal" is substituted by 'into the place of removal". Thus, from 01.04.2008, with the aforesaid amendment, the Cenvat Credit is available only upto the place of removal. xxxxxxxxx. From the above, it is cleared that the GTA service used for the purpose of outward transportation of goods from the factory/depot to customer's premises is not covered within the ambit of Rule 2(l) of the CCR, 2004. xxxxxxxxxxx 8. I further find that the present issue has already been decided by Hon'ble Supreme Court in relation to place of removal is in case of CCE & ST vs. Ultra Tech Cement Ltd. - 2018 (9) G.S.T.L. 337 (S.C.), dated 1-2-2018 in Civil Appeal No. 11261 of 2016 on the issue of CENVAT Credit on Goods Transport Agency Service availed for transport of goods from the 'place of removal' to the buyer's premises. By following the decision of the Hon'ble Supreme Court in the cited case, I concluded that the appellant has wrongly availed cenvat credit ....
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.... 8,86,409 88,000 E/51645/21 09.03.2015 April 2014 to Sept 2014 8,35,786 83,000 E/51646/21 31.03.2016 April 2015 to Dec 2015 13,45,554 1,34,000 E/51648/21 07.11.2016 Jan 2016 to June 2016 6,56,811 65,000 9. These ten appeals have been filed to assail the order dated 14.06.2019 passed by the Commissioner (Appeals). 10. Ms. Sukriti Das, learned counsel for the appellant assisted by Ms. Saumya Malhotra, made the following submissions: (i) In the present case, the sales were on FOR destination basis. Thus, the premises of the buyer would be the 'place of removal' of goods and CENVAT credit on GTA service for outward transportation of finished goods upto the place of buyer would, therefore, be admissible in terms of rule 2(l) of the 2004 Rules. In support of this submission, learned counsel placed reliance upon the Circular dated 08.06.2018 issued by the Central Board of Indirect Taxes and Customs [the 2018 Circular] as also the decision of the Larger Bench of the Tribunal in The....
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....stination basis. 15. Rule 2(l) of the 2004 Rules, w.e.f. 01.03.2008 defines 'input service' and the relevant portion is reproduced below: "2(l) "input service" means any service, (i) used by a provider of output service for providing an output service; or (ii) used by a manufacturer, whether directly or indirectly, in or in relation to the manufacture of final products and clearance of final products upto the place of removal. ***** " 16. Prior to 01.03.2008, the word 'from' occurred in rule 2(l)(ii), instead of the word 'upto'. 17. It is clear from the aforesaid rule 2(l) of the 2004 Rules that w.e.f. 01.03.2008, 'input service' means any service used by a manufacturer, directly or indirectly, in or in relation to the manufacture of final products and clearance of final products upto the place of removal. 18. The word 'place of removal', therefore, assume importance. According to the appellant, the 'place of removal' will be the premises of the buyers as the sale is on FOR destination basis, while according to the department the 'place of removal' would be the factory gate of the appellant. 19. It also needs to be noted that 'plac....
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....xcisable goods are to be sold after their clearance from the factory, from where such goods are removed." 24. Thus, prior to 11.07.2014 it was section 4(3)(c) of the Central Excise Act that defined 'place of removal' and w.e.f. 11.07.2014 rule 2(qa) of the 2004 Rules itself defines 'place of removal'. 25. According to the appellant, since the 'place of removal' is the premises of the buyer, the cost of transportation of the goods upto the premises of the buyer would be included in determining the transaction value of the goods for the purpose of payment of excise duty and the appellant would also be entitled to avail CENVAT credit as it would be an 'input service' defined under rule 2(l) of the 2004 Rules. 26. The department, however, believes that since the 'place of removal' is the factory gate of the appellant, credit of service tax paid on GTA service would not be available to the appellant since it would not be an 'input service' under rule 2(l) of the 2004 Rules. 27. The Commissioner (Appeals) has disallowed credit to the appellant basis the judgment of the Supreme Court in Ultratech Cement. This judgment, therefore, needs to be considered first. 28. T....
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....g an end to the transport journey. 8. The aforesaid order of the Adjudicating Authority was upset by the Commissioner (Appeals) principally on the ground that the Board in its Circular dated August 23, 2007 had clarified the definition of 'place of removal' and the three conditions contained therein stood satisfied insofar as the case of the respondent is concerned, i.e. (i) regarding ownership of the goods till the delivery of the goods at the purchaser's door step; (ii) seller bearing the risk of or loss or damage to the goods during transit to the destination and; (iii) freight charges to be integral part of the price of the goods. This approach of the Commissioner (Appeals) has been approved by the CESTAT as well as by the High Court. This was the main argument advanced by the learned counsel for the respondent supporting the judgment of the High Court. ***** 10. In the first instance, it needs to be kept in mind that Board's Circular dated August 23, 2007 was issued in clarification of the definition of 'input service' as existed on that date i.e. it related to unamended definition. 11. As can be seen from the reading of the aforesaid portio....
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....e principles in ascertaining the place of removal in the context of admissibility of CENVAT credit on GTA Services have not been laid down, as was also submitted by the learned counsel for the appellant. The said issue has been left open to be decided on the facts of each case." 31. In Sweety Industries the Larger Bench of the Tribunal observed as follows: "38. A perusal of the aforesaid judgment of the Supreme Court in Ultra Tech Cement would indicate that the Supreme Court did not lay down the principles for ascertaining the 'place of removal' in the context of admissibility of CENVAT credit on GTA services and only dealt with the change brought about by the amendment made in rule 2(l) of the 2004 Rules on 01.03.2008. This is how the Larger Bench of the Tribunal in The Ramco Cements Limited vs. The Commissioner of Central Excise also interpreted the decision of the Supreme Court in Ultra Tech Cement." 32. It also needs to be noted that after the decision of the Supreme Court in Ultra Tech Cement, the Central Board of Indirect Taxes and Customs issued a Circular dated 08.06.2018. In the said Circular the general principles for determination of 'place of removal' wer....
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....t in the case of CCE v. Ispat Industries Ltd. - 2015 (324) E.L.T. 670 (S.C.) may be applied. Apex Court, in this case has upheld the principle laid down in M/s. Escorts JCB (supra) to the extent that 'place of removal' is required to be determined with reference to 'point of sale' with the condition that place of removal (premises) is to be referred with reference to the premises of the manufacturer. The observation of Hon'ble Court in para 16 in this regard is significant as reproduced below: "16. It will thus be seen where the price at which goods are ordinarily sold by the assessee is different for different places of removal, then each such price shall be deemed to be normal value thereof. Sub-clause (b)(iii) is very important and makes it clear that a depot, the premises of a consignment agent, or any other place or premises from where the excisable goods are to be sold after their clearance from the factory are all places of removal. What is important to note is that each of the premises is referable only the manufacturer and not to the buyer of excisable goods. The depot or the premises of the consignment agent of the manufacturer are obviously places which are refe....
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...., the service is treated as input service only 'up to the place of removal'. 6. Facts to be verified: This circular only bring to the notice of the field the various judgments of Hon'ble Supreme Court which may be referred for further guidance in individual cases based on facts and circumstances of each of the case. Past cases should accordingly be decided. (emphasis supplied) 34. As the aforesaid Circular refers to the decision of the Supreme Court in Ispat Industries and Commr. of Cus. & Ex., Aurangabad vs. Roofit Industries Ltd. [2015 (319) E.L.T. 221 (S.C.)], it would be useful to reproduce the relevant portions of the judgment of the Supreme Court in the aforesaid two decisions. 35. In Roofit Industries, the Supreme Court noticed that the 'place of removal' becomes a determinative factor for the purpose of valuation and it has to be seen at what point of time sale is effected, namely whether it is on the factory gate or a later point of time when the delivery of goods is effected to the buyer at the premises of the buyer. The Supreme Court observed that the charges which are to be added have to be upto the stage of transfer of the ownership in as much as once....
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.... Unless a different intention appears, the rules contained in Sections 20 to 24 are rules for ascertaining the intention of the parties as to the time at which the property in the goods is to pass to the buyer. 15. These are clear finding of facts on the aforesaid lines recorded by the Adjudicating Authority. However, the CESTAT did not take into consideration all these aspects and allowed the appeal of the assessee by merely referring to the judgment in the case of Escorts JCB Ltd. Obviously the exact principle laid down in the judgment has not been appreciated by the CESTAT." 36. In Ispat Industries, the issue involved was whether by virtue of a transit insurance policy in the name of the manufacturer, excise duty is liable to be recovered on freight charges incurred for transportation of goods from the factory gate to the buyer's premises, treating the buyer's premises as the place of removal. The Supreme Court noticed the earlier decision of the Supreme Court in Roofit Industries in paragraph 31 of the decision and made the following observations in paragraph 32. "32. It will be seen that this is a decision distinguishing the Escorts JCB's case on facts. It....
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.... the case of Madras Cements Ltd., has held as follows: "11. From the facts of the present case, it is clear from the invoices that title of the goods had passed on from seller to buyer only at the place of destination, which is the address of the buyer. As such, the buyer had no right over the goods till delivered to it. The Tribunal has not considered this aspect and has only relied on the amendment made to the definition of "input service" with effect from 1-4-2008 and rejected the claim of the appellant-assessee after that date. No further reason has been given by the Tribunal nor any finding has been recorded with regard to place of completion of sale of the goods. 12. Since we are of the opinion that the sale had concluded only after the delivery of the goods was made at the address of the buyer, in the facts of the present case the appellant-assessee would be entitled to the benefit of Cenvat credit on Service Tax paid on outward transportation of goods by the assessee even after 1-4-2008. The appellant-assessee would thus be entitled to such benefit for the period 1-4-2008 to 31-7-2008 which has been denied to it by the authorities below. 13. For t....
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.... the assessee or in other words where the goods are cleared on FOR basis the freight paid on outward transportation would qualify as "Input Service". As regard reliance placed upon by the revenue on the judgment of the Apex Court, we find that the Hon'ble Supreme Court was concerned only with the "place of removal" but did not go into the aspect of "Point of sale" or the FOR price destination issue. Hence the said judgment is not applicable in the facts of the present case." (emphasis supplied) 40. The appeal filed by the department before the Gujarat High Court was dismissed on 23.01.2020. The relevant portion of the judgment of the Gujarat High Court in Ultratech Cement is reproduced below: "7. In view of the aforesaid findings of facts given by the Tribunal relying upon the Board Circular No.1065/2018CX dated 8th June 2018 as well as the decision of the Supreme Court in the case of Ultratech Cement Ltd vs. Commissioner reported in 2015(37) STR 364(T) and in the case of Commissioner of Cus. & C. Ex. Aurangabad vs. Roofit Industries reported in 2015(319) ELT 221(SC), no question of law much less of any substantial question of law arises out of the impugned ord....