TaxTMI 
TaxTMI 
2024 (7) TMI 469
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....s input services including Goods Transport Agency (GTA) service for transportation of finished goods from the factory. The appellant have cleared a portion of the finished goods to M/s Bajaj Auto Limited (BAL) on FOR basis. In terms of the purchase order placed by Bajaj Auto Limited, the appellant is required to transport the finished goods on FOR basis at the customer's site. Therefore, the cost of transportation is to be borne by the appellant and the property and risk in the goods vests with the appellant till the delivery of the goods up to the customer's premises. The freight charges/GTA service charges is included in the price charged to the customer-BAL and the same is not shown separately in the invoices raised by the appellants in sale of finished goods. The appellant has availed Cenvat credit in respect of service tax paid, under reverse charge mechanism on GTA service for transportation of goods from its factory/depot to the premises of the customer-BAL. The Department had interpreted that the aforesaid Cenvat credit on GTA services has been availed for transportation of finished goods beyond the place of removal and thus did not qualify as 'input service' within the mea....
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....category, i.e., (c) 'exclusion' part of the definition, which specifically provide for certain services or portion of such services, which are not included in the above definition. He further stated that their case does not fall under the exclusion category under (c) above. 3.2 He further stated that customer's premises is the 'place of removal' as envisaged in CBEC's circular No. 1065/4/2018-CX dated 08.06.2018; as in their case, the appellant has contracted with customer-BAL for sale of finished goods on FOR basis, where the ownership, risk and transit remained with the appellant-seller until the buyer-BAL accepted the goods on delivery and inasmuch as the appellant being the seller alone remained as the owner of the goods retaining the right of disposal. Hence, learned Advocate pleaded that the place of removal would be the buyer's/customer's premises in their case. 3.3 Learned Advocate also stated that it is fact accepted by the Commissioner (Appeals) in the impugned Order that the appellant sold their finished goods to the customer-BAL on FOR basis. Therefore, he stated that their case is covered by paragraph 4 of the CBEC circular dated 08.06.2018 and hence GTA se....
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....iew of this, learned Advocate submitted that the extended period of limitation is not invokable and penalty cannot be imposed in respect of the issue which is in the nature of interpretation of law. For the above reasons, he pleaded that on merits, interest is also not recoverable from the appellant. 4.1 Learned Authorised Representative (AR) stated that the issue of admissibility of Cenvat credit in respect of GTA service on outward transportation of finished goods up to the place of delivery, was referred to the Larger Bench of the Tribunal, and in the Interim order No. 40020/2023 dated 21.12.2023, it has been held that where clearance of finished goods are against FOR contract basis, the ascertainment of 'place of removal' would depend upon facts of the case and the decision of the Hon'ble Supreme Court in the judgements delivered in the case of Emco and Roofit industries. Further, the ratio decidendi of the following judgements of the Hon'ble Supreme Court in the case of Escorts JCB Ltd. Vs. Commissioner of Central Excise, Delhi-II [2002 (146) E.L.T. 31 (S.C.)] and Commissioner of Customs & Central Excise, Nagpur Vs. Ispat Industries Ltd. [2015 (324) E.L.T. 670 (S.C.)]....
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....ubmitted by both sides along with citation of case laws which both sides have mentioned in support of their case. 6. The short point for determination before me is whether availing of Cenvat credit by the appellant in respect of Goods Transport Agency (GTA) service used for transportation of finished goods in the present factual matrix of the case is permissible in terms of Cenvat Credit Rules, 2004 or not? and whether such Cenvat credit is recoverable treating it as wrongly availed credit, along with interest and penalty under Rule 15(1) of CCR, 2004. 7.1 The relevant portion of the impugned order providing the findings of the learned Commissioner (Appeals) and his order rejecting the appeal of the appellant and upholding the confirmation of adjudged demands by the original authority, on the issue are as follows: "7.1 The issue in hand is for the period from January 2015 to June 2017. Recently, the Hon'ble Supreme Court in the case of CCE & ST Vs. Ultra Tech Cement Ltd. - 2018 (9) G.S.T.L. 337 (S.C.) has held that no Cenvat credit will be allowed to the manufacturer in respect of GTA services availed on outward transportation of goods from the place of r....
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....to examine the admissibility of Cenvat credit in the context of factual matrix of the present case, firstly I would like to be guided by the order of the Larger Bench of the Tribunal in the case of The Ramco Cements Limited Vs. The Commissioner of Central Excise in deciding about the issue of admissibility of Cenvat credit in respect of GTA service, for outward transportation of finished goods up to the place of delivery in the relevant Interim order No. 40020/2023 dated 21.12.2023; then I would like to proceed to examine the notification, judgement of Hon'ble Apex Court and CBEC's circular which have been relied upon in the impugned order to arrive at a conclusion, the relevant portion of which are extracted and given below: Extract of relevant portion of Interim Order No. 40020/2023 dated 21.12.2023 27. Applying the said principle to the present circumstances, it is seen that the Supreme Court, though in paragraph 13 observed that CENVAT credit on Goods Transport Agency availed for transport of goods from place of removal to buyers' premises was not admissible, but the principles in ascertaining the place of removal in the context of admissibility of CENVAT cred....
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....h the parties in accordance with law. We make it clear that we have not expressed anything on merits on the question of penalty." Accordingly, we set aside the impugned judgment and restore the appeal(s) to the file of the High Court to its original number, for being considered afresh in accordance with law. All contentions to both the parties are left open. The appeals are disposed of accordingly. All pending applications are also disposed of. No costs." 30. The Madhya Pradesh High Court in Mahle Engine Components India also held that credit is not admissible on GTA services for removal of finished goods to the buyers' premises. Here also, the Circular dated 8.6.2018 of the Board was not considered. The said judgment has also been challenged before the Supreme Court. 31. The Karnataka High Court in Bharat Fritz Werner considered the judgment of the Supreme Court in Ultratech Cements and also the Circular dated 08.06.2018 of the Board and held as follows: "13. The CESTAT, in the case of Bharat Fritz Werner Ltd. v. C.C., C.E. & S.T-Commissioner of Central Tax [CEA 56/2019], has recorded in paragraph No. 5 that as per the purchase....
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....lity of Cenvat credit on the GTA service involved up to the place of removal: Extract of the judgement in Commissioner of Customs & C. Ex., Aurangabad Vs. Roofit Industries Ltd. Civil Appeal No. 5541 of 2004, decided on 23-4-2015 "2. It is the case of the Revenue that on the basis of general intelligence collected, respondent/assessee was indulging in evasion of Central Excise duty by not computing the assessable value of finished goods properly to the extent that it was deducting the amount of freight, insurance and unloading charges from the price of excisable goods though the place of removal of finished goods was different from the factory gate. xx xx xx xx xx 12. The principle of law, thus, is crystal clear. It is to be seen as to whether as to at what point of time sale is effected namely whether it is on factory gate or at a later point of time, i.e., when the delivery of the goods is effected to the buyer at his premises. This aspect is to be seen in the light of provisions of the Sale of Goods Act by applying the same to the facts of each case to determine as to when....
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....to the contract intend it to be transferred. (2) For the purpose of ascertaining the intention of the parties regard shall be had to the terms of the contract, the conduct of the parties and the circumstances of the case. (3) 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. 16. As a result, order of the CESTAT is set aside and present appeal is allowed restoring the order passed by the Adjudicating Authority." Extract of the judgement in Commissioner of C. Ex., Mumbai-III Vs. EMCO Ltd. Civil Appeal No. 3418 of 2004 with Civil Appeal No. 8966 of 2011, decided on 31-7-2015 "2. Since the assessee w....
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....e arriving at the transaction value. Again, in the context of the present case, what is to be determined is as to whether the 'place of removal' was the factory gate of the respondent or it was the premises of the purchaser at the time of delivery of these goods. 12. If the goods are cleared at the factory gate, then the excise duty has to be charged on the valuation of the goods to be arrived at the factory gate as that would be the place of removal of goods. It would mean that the expenses which are incurred after the removal of goods from the factory gate namely freight, insurance and unloading charges, etc., are not to be included in the valuation of the goods for the purposes of excise duty. The reason is that the sale of goods to the buyer is at the factory gate when the property passes to the buyer and the aforesaid expenditure are thereafter incurred by the buyer. It is this aspect which was gone into by this Court in the case of Escorts JCB Ltd. (supra). That was a case where question of including insurance charges came up for consideration. It was found as a fact that the goods were cleared at the factory gate. On these facts, this Court held that insurance charg....
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....nion v. Hall, it is observed that a seller in possession of the goods when the property and risks have passed may insure his buyer's interest. Referring to a decision reported in Hepburn v. A. Tomlinson (Hauliers) Ltd. - H.L. (E) 1966 451, it has been submitted on behalf of the assessee that a bailee apart from its interest may also insure the interest of the owner of the property. There may be floating insurance policy covering not only the limited interest but the whole interest of the ownership of the customers in the normal course. To substantiate the point further, a reference to Para 5-012 at Page 184 of Benjamin's Sale of Goods Fourth Edition has been made which is to the following effect : "Insurance. The passing of property is rarely of relevance to insurance. A person can insure goods to their full value against any loss on behalf of anyone who may be entitled to an interest in the goods at the time the loss occurs, provided that it appears from the terms of the policy that it was intended to cover their interest. Also a buyer will have an insurable interest in goods if they are at his risk, whether or not the property has passed to him". From t....
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.... from the factory gate to the place or places where it is sold. The cost of transportation will include the cost of insurance on the freight for transportation of the goods from the factory gate to the place or places of delivery". 13. We have extensively discussed the judgment in Escorts JCB Ltd. because of the reason that the Tribunal has allowed the appeal of the respondent herein with the observations that case of the respondent is covered by this judgment. We would like to point out at this stage that in Commissioner of Central Excise, Noida v. Accurate Meters Ltd. - (2009) 6 SCC 52 = 2009 (235) E.L.T. 581 (S.C.), the Court took note of few more decisions, including the case of Escorts JCB Ltd., and reiterated the aforesaid principles but at the same time also emphasising that the place of removal depends on the facts of each case. 14. In a recent decision of this Court in Commissioner, Customs and Central Excise, Aurangabad v. M/s. Roofit Industries Ltd. - (2015) 5 SCALE 470 = 2015 (319) E.L.T. 221 (S.C.), the position in law was summarized in the following manner : "12. The principle of law, thus, is crystal clear. It is to be seen as to whether as....
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....nsit insurance policy and whenever there was a loss or damage to goods M/s. Emco claims the same from the insurance company.....the possession of the goods is transferred only at the premises of the buyers/customers". The Commissioner also noted that the aforesaid statement was even confirmed by the General Manager of the assessee. 17. The Tribunal did not bother to look into any of the aforesaid aspects and/or discussed the same. In a cryptic non-reasoned order, the Tribunal allowed the appeal. To be precise, the following order is passed : "Appellants were issued a notice proposing to levy duty in the value of amount of freight and transit insurance recovered by them but the same suppressed from the department as it appears from page 10 of the show cause notice. 2. It was confirmed after hearing both sides, it is found that the issue is well settled in favouring the assessee by the decision in the case of Associated Strips Ltd. [2002 (143) E.L.T. 131 (Tri.)] which has been approved by the Apex Court in the case of Escorts JCB Ltd. v. Collector of Central Excise [2002 (146) E.L.T. 31 (S.C.)]. Being bound by the same, this order impugned cannot be restrai....
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....f the transfer of the ownership of goods inasmuch as once the ownership in goods stands transferred to the buyer, any expenditure incurred thereafter has to be on buyer's account and cannot be a component which would be included while ascertaining the valuation of the goods manufactured by the buyer. Thus, the principle of law, is in determining at what point of time sale is effected namely whether it is on factory gate or at a later point of time i.e. when the delivery of the goods is effected to the buyer at his premises, which can be seen in the light of provisions of the Sale of Goods Act, 1930 by applying the same to the facts of each case to determine as to when the ownership in the goods is transferred from the seller to the buyer. In the present context of the case before me, the GTA services upto the place of removal has to be determined in terms of the above principles laid down in the above judgements of the Hon'ble Supreme Court. Extract of the judgement of Hon'ble Karnataka High Court in Bharat Fritz Werner Ltd. Vs. Commissioner of Central Excise, Bangalore C.E.A. No. 56 of 2019 c/w 71 of 2019, decided on 30-6-2022 "6. Appellant is a Priva....
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....en 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 the forgoing reasons, this appeal stands allowed. The question of law is answered in favour of the assessee and against the Revenue. The order of the Tribunal to the extent of disallowing Cenvat credit to the appellant for the period after 31-3-2008 is quashed." 17. The Ministry of Finance (Department of Revenue) Central Board of Indirect Taxes and Customs, New Delhi, has issued Circular dated 8-6-2018 and clarified the definition, 'Place of Removal'. In Para 5 of the Circular, the Ministry has referred to the judgment in the case of CCE & ST v. Ultra Tech Cement Ltd. [Civil Appeal No. 11261 of 2016, da....
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....e Supreme Court in the case of CCE v. M/s. Roofit Industries Ltd. - 2015 (319) E.L.T. 221 (S.C.), CCE v. Ispat Industries Ltd. - 2015 (324) E.L.T. 670 (S.C.), CCE, Mumbai-III v. Emco Ltd. 2015 (322) E.L.T. 394 (S.C.) and CCE & ST v. Ultra Tech Cement Ltd. dated 12-2018 in Civil Appeal No. 11261 of 2016 [2018 (9) G.S.T.L. 337 (S.C.)]. In this regard, references have been received from field formations seeking clarification on implementation of aforesaid circulars of the Board in view of judgments of Hon'ble Supreme Court. 2. In order to bring clarity on the issue it has been decided that Circular No. 988/12/2014-CX., dated 20-10-2014 shall stand rescinded from the date of issue of this circular. Further, clause (c) of para 8.1 and para 8.2 of the Circular No. 97/8/2007-CX., dated 23-8-2007 are also omitted from the date of issue of this circular. 3. General Principle : As regards determination of 'place of removal', in general the principle laid by Hon'ble Supreme Court 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....
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....shall continue to be dealt in terms of Circular No. 999/6/2015-CX., dated 28-2-2015 as the judgments cited above did not deal with issue of export of goods. In these cases otherwise also the buyer is located outside India. 5. CENVAT Credit on GTA Services etc. : The other issue decided by Hon'ble Supreme Court in relation to place of removal is in case of CCE & ST v. Ultra Tech Cement Ltd., 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. The Apex Court has allowed the appeal filed by the Revenue and held that CENVAT Credit on Goods Transport Agency service availed for transport of goods from the place of removal to buyer's premises was not admissible for the relevant period. The Apex Court has observed that after amendment of in the definition of 'input service' under Rule 2(l) of the CENVAT Credit Rules, 2004, effective from 1-32008, 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 ....
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....y are so associated that they have interest, directly or indirectly, in the business of each other. (c) "place of removal" means- (i) a factory or any other place or premises of production or manufacture of the excisable goods; (ii) a warehouse or any other place or premises wherein the excisable goods have been permitted to be deposited without payment of duty; (iii) a depot, 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, from where such goods are removed;" (cc) "time of removal", in respect of the excisable goods removed from the place of removal referred to in sub-clause (iii) of clause (c), shall be deemed to be the time at which such goods are cleared from the factory; (d) "transaction value" means the price actually paid or payable for the goods, when sold, and includes in addition to the amount charged as price, any amount that the buyer is liable to pay to, or on behalf of, the assessee, by reason of, or in connection with the sale, whether payable at the time of the sale or at any other time, including, ....
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.... except for the provision of one or more of the specified services; or] (B)services provided by way of renting of a motor vehicle], in so far as they relate to a motor vehicle which is not a capital goods; or (C) service of general insurance business, servicing, repair and maintenance , in so far as they relate to a motor vehicle which is not a capital goods, except when used by- (a) a manufacturer of a motor vehicle in respect of a motor vehicle manufactured by such person; or (b) an insurance company in respect of a motor vehicle insured or reinsured by such person; or (c) such as those provided in relation to outdoor catering, beauty treatment, health services, cosmetic and plastic surgery, membership of a club, health and fitness centre, life insurance, health insurance and travel benefits extended to employees on vacation such as Leave or Home Travel Concession, when such services are used primarily for personal use or consumption of any employee. Explanation.-For the purpose of this clause, sales promotion includes services by way of sale of dutiable goods on commission basis." 8.1 Plain reading of the above leg....
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....or clearance of final products up to the place of removal'. The only issue in dispute is in determining 'the place of removal' in each case after examining the facts of the case and to decide whether they fall under the above category (a) or (b) as above. 8.3 From the factual matrix of the case, I find that the Purchase Order placed by the customer-BAL with the appellant specifically provide for delivery as follows:- "Delivery Term: FREE DELIVERY AT OUR WORKS". Further, the payment terms for the sale of goods is 45 days from the date of goods being received at the customer's factory works. Thus, I find that the sale of goods in the present case takes place when the goods are delivered by the appellant and the factory works of the customer-BAL. I also find that the impugned order did not discuss the facts of the case to arrive at a decision on 'place of removal' and further assumed that the customer's premises to be the place of removal, without any basis and without examination of the facts of the case. Thus, the impugned order cannot be sustained in law. 8.4 I also find that the Chartered Accountant M/s Agarwal Anoop & Associates, M. No. 086931 vide their c....
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.... as factory, warehouse, depot or premises of consignment agent but did not specify to which extent that service is allowable. After amendment, the inputs service is to be determined with reference to 'end point where sale is effected' i.e., service provided upto the place of removal. Since the reference point for determination of the nature of input service changed from 'starting place by the term "from" ' to 'end place by the term "upto" ' in the use of words preceding to 'place of removal', the determination of sale to the customer has become the criteria for deciding the admissibility of inputs service credit in the case of GTA services. In the present factual matrix of the case, I find that the sale is effected when the final products are delivered at the premises of the works/factory of the customer- BAL, and hence the outward transportation costs for sale on FOR basis becomes eligible for input service credit in terms of CCR, 2004. 8.7 Further, as clarified by the CBEC and as has been held in the number of decisions of the higher judicial forum, in respect of issues concerning interpretation of law and ongoing disputes before the judicial forms, which necessitated issue of....