Custom, Excise & Service Tax Tribunal
Prism Cement Ltd vs Jabalpur on 20 November, 2018
Appeal No. E/50161, 50421/2018-EX(DB)
IN THE CUSTOMS, EXCISE & SERVICE TAX
APPELLATE TRIBUNAL
West Block No. 2, R.K. Puram, New Delhi - 110 066.
Date of Hearing: 13.8.2018
Date of pronouncement:20.11.2018
Appeal No. E/50161, 50421/2018-EX(DB)
[Arising out of Order-in-Original No. 27-30/COMMR/CEX/JBP/2017 dated
11/10/2017 & OIA-BHO-EXCUS-001-APP-302-17-18 dated 29/09/2017
passed by the Commissioner of Central Excise and Service Tax-BHOPAL &
Bhopal(Appeals)]
PRISM CEMENT LTD Appellant
Vs.
CGST C.C & C.E-JABALPUR
CGST C.E & C.C-BHOPAL Respondent(s)
Appearance Smt. Sukriti Das, Adv for the appellant Shri M.R.Sharma,(DR) for the respondent CORAM: Hon'ble Mr. Bijay Kumar, Member (Technical) Hon'ble Mr. Ajay sharma, Member (Judicial) Final Order No: 53303-53304/2018 Per: Bijay Kumar
1. Both the appeals are being disposed of by the common order as the issue involved in both the appeals are identical in nature
2. The appellant is in appeal against the impugned order where the Cenvat Credit has been denied to them towards outward transportation charge under GTA service for the period in January, 2005 to December, 2011 and July, 2013 to February, 2016.
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3. The brief facts of the case are that the appellant is engaged in the manufacture of cement and clinker falling under chapter heading 25 of the First Schedule to the Central Excise Tariff Act,1985, and sales their cement/clinker from their factory to both the dealers as well as to the various institutional buyers. When these goods are sold to these dealers and institutional buyers, the freight and transportation charges are borne by the appellant which is on FOR basis. The proceedings were initiated against the appellant by issuing of the various Show Cause Notices on the ground that the place of removal for the clearance of goods are only factory gate /depot and not beyond that, and hence the Cenvat Credit availed on GTS service is not admissible as it does not qualifies as input service, defined under Rule 2 (l) of Cenvat Credit Rules, 2004.
4. In respect of Appeal No. E/50161/2018, this is the second round of litigation for period from January, 2005 to December 2011, and Appeal No. E/50421/2018, is a periodical demand on the same ground. The demands were confirmed after following the due process of law.
5. It is submitted by the Ld. Advocate that up to period March, 2008, the definition of input service contained the phrase "from the place of removal".
The Cenvat credit availability "From place of removal" has been settled in their favour in view of Hon'ble Supreme Court order dated 17/1/2018 and 5/2/2018 3 Appeal No. E/50161, 50421/2018-EX(DB) in case of CCE vs. Vasavaddatta Cement Ltd., 2018(11) GSTL3 (SC) and in the case of CC, CE & ST, Guntur vs. The Andhra Sugar Ltd., 2018-TIOL-45-SC-CX.
The definition of the input service during the relevant period is reproduced as under;
(1) " input service" means any service-
(i) used by a provider of taxable service for providing an input service, or
(ii) used by the manufacturer, whether directly or indirectly, in or in relation to the manufacture of final products and clearance of final products from the place of removal, and includes services used in relation to setting up, modernization, renovation or repair of a factory, premises of provider of output service or an office relating to such factory or premises, advertisement or sales promotion, market research, storage upto the place of removal, procurement of inputs, activities relating to business, such as accounting, auditing, financing, recruiting and quality control, coaching and training computer networking. Credit rating, share registry, and security, inward transportation of inputs or capital goods and outward transportation upto the place of removal;
In view of above the demand pertaining to period upto March, 2008 raised is not sustainable and liable to be set aside.
6. It was further submitted by the Ld. Advocate that accordingly to Ld. Advocate for the period from 1/4/2008 onward, the phrase "from the place of removal has been substituted by phrase too" "upto to place of removal". Hon'ble 4 Appeal No. E/50161, 50421/2018-EX(DB) Supreme Court in the case of CCE & ST vs. Ultratech Cement Ltd. 2018 (9) GSTL 337 (S.C.) has held as under;
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. Relevant portion of the said circular is as under :
"ISSUE : Up to what stage a manufacturer/consignor can take credit on the service tax paid on goods transport by road?
COMMENTS: This issue has been examined in great detail by the CESTAT in the case of M/s. Gujarat Ambuja Cements Ltd. vs. CCE, Ludhiana [2007 (6) S.T.R. 249 (Tri-D)]. In this case, CESTAT has made the following observations :-
"the post sale transport of manufactured goods is not an input for the manufacturer/consignor. The two clauses in the definition of „input services‟ take care to circumscribe input credit by stating that service used in relation to the clearance from the place of removal and service used for outward transportation upto the place of removal are to be treated as input service. The first clause does not mention transport service in particular. The second clause restricts transport service credit upto the place of removal. When these two clauses are read together, it becomes clear that transport service credit cannot go beyond transport upto the place of removal. The two clauses, the one dealing with general provision and other dealing with a specific item, are not to be read disjunctively so as to bring about conflict to defeat the laws‟ scheme. The purpose of interpretation is to find harmony and reconciliation among the various provisions".
Similarly, in the case of M/s. Ultratech Cements Ltd v. CCE Bhavnagar - 2007- TOIL-429-CESTAT-AHM = 2007 (6) S.T.R. 364 (Tribunal), it was held that after the final products are cleared from the place of removal, there will be no scope of subsequent use of service to be treated as input. The above observations and views explain the scope of the relevant provisions clearly, correctly and in accordance with the legal provisions. In conclusion, a manufacturer/consignor can take credit on the Service Tax paid on outward transport of goods up to the place of removal and not beyond that.
In this connection, the phrase „place of 8.2 removal‟ needs determination taking into account the facts of an individual case and the applicable provisions. The phrase „place of removal‟ has not been defined in CENVAT Credit Rules. In terms of sub-rule (t) of Rule 2 of the said rules, if any words or expressions are used in the CENVAT Credit Rules, 2004 and are not defined therein but are defined in the Central Excise Act, 1944 or the Finance Act, 1994, they shall have the same meaning for the CENVAT Credit Rules as assigned to them in those Acts. The phrase „place of removal‟ is defined under Section 4 of the Central Excise Act, 1944. It states that, -
5Appeal No. E/50161, 50421/2018-EX(DB) "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 stored 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."
It is, therefore, clear that for a manufacturer/consignor, the eligibility to avail credit of the Service Tax paid on the transportation during removal of excisable goods would depend upon the place of removal as per the definition. In case of a factory gate sale, sale from a non-duty paid warehouse, or from a duty paid depot (from where the excisable goods are sold, after their clearance from the factory), the determination of the „place of removal‟ does not pose much problem. However, there may be situations where the manufacturer /consignor may claim that the sale has taken place at the destination point because in terms of the sale contract/agreement (i) the ownership of goods and the property in the goods remained with the seller of the goods till the delivery of the goods in acceptable condition to the purchaser at his door step; (ii) the seller bore the risk of loss of or damage to the goods during transit to the destination; and (iii) the freight charges were an integral part of the price of goods. In such cases, the credit of the Service Tax paid on the transportation up to such place of sale would be admissible if it can be established by the claimant of such credit that the sale and the transfer of property in goods (in terms of the definition as under Section 2 of the Central Excise Act, 1944 as also in terms of the provisions under the Sale of Goods Act, 1930) occurred at the said place."
11.As can be seen from the reading of the aforesaid portion of the circular, the issue was examined after keeping in mind judgments of CESTAT in Gujarat Ambuja Cement Ltd., 2007 (6) S.T.R. 249 (Tribunal) and M/s. Ultratech Cement Ltd., 2007 (6) S.T.R. 364 (Tri.- Ahd.). Those judgments, obviously, dealt with unamended Rule 2(l) of Rules, 2004. The three conditions which were mentioned explaining the „place of removal‟ as defined under Section 4 of the Act, there is no quarrel upto this stage. However, the important aspect of the matter is that Cenvat Credit is permissible in respect of „input service‟ and the Circular relates to the unamended regime. Therefore, it cannot be applied after amendment in the definition of „input service‟ which brought about a total change. Now, the definition of „place of removal‟ and the conditions which are to be satisfied have to be in the context of „upto‟ the place of removal. It is this amendment which has made the entire difference. That aspect is not dealt with in the said Board‟s circular, nor it could be.
12.Secondly, if such a circular is made applicable even in respect of post amendment cases, it would be violative of Rule 2(l) of Rules, 2004 and such a situation cannot be countenanced.
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13.The upshot of the aforesaid discussion would be to hold that Cenvat Credit on goods transport agency service availed for transport of goods from place of removal to buyer‟s premises was not admissible to the respondent. Accordingly, this appeal is allowed, judgment of the High Court is set aside and the Order-in- Original dated August 22, 2011 of the Assessing Officer is restored.
7. It was further contended while Ld. Advocate that the demand is not sustainable for period beyond normal period of limitation (one year) on the ground that there was wide spread confusion about the availability of Cenvat Credit on this score.
They have acted in accordance with the provision of the law as prevalent during the relevant time. The issue was contentious issue and which has resulted into the various conflicting judgements from the various judicial fora including High Courts and Supreme Court such as;
10 September 2004 The Cenvat Credit Rules, 2004 were brought into force vide Notification No. 23/2004-(N.T.) 14 March 2007 Gujrat Ambuja Cement vs. CCE, Ludhiana, 2007 (6) S.T.R. 249 (Tri.Del) The Hon'ble Tribunal held that credit is inadmissible as transportation being as service beyond the " point of duty paid removal".
13 August 2007 India Cement Limited vs. CCE, 2007 (8) S.T.R. 43(Tri.-Bang) The Tribunal disagreed with the interpretation taken by the Division Bench in Gujart Ambuja (Supra) and referred the matter to the Larger Bench.
23 August 2007 The Department issued a circular which stated that the credit of service tax paid on transportation up to place of sale is admissible on fulfilment of conditions mentioned in the circular.
1 April 2008 Rule 2(l) of the Credit Rules, 2004 was amended and the phrase 'from the place of removal 'was substituted to ' upto the place of removal' .
10 February 2009 Ambuja Cement Ltd. vs Union of India, 2009 (236) E.L.T. 431(P &H) The Hon'ble Punjab and Haryana High Court overruled the decision in Gujrat Ambuja Cement(supra) 7 Appeal No. E/50161, 50421/2018-EX(DB) 18 May 2009 ABB Ltd. vs. CCE, 2009 (15) S.T.R. 23(Tri-LB) The Larger Bench held that transportation of final product must be considered in light of the requirement of the business.
15 June 2009 The Department accepted the order of the Hon'ble Punjab and Haryana High Court and decided not to file an SLP. 23 March 2011 CCE v. ABB Ltd., 2011(23) S.T.R.97(Kar.) The Hon'ble High Court affirmed the decision of the larger bench in ABB (supra).
6 April 2011 CCE v. Parth Poly Woven Pvt. Ltd. 2012(25) S.T.R 4(Guj) The Hon'ble Gujarat High Court held that transportation of finished goods is inextricably linked with the manufactured process.
3 October 2012 Commissioner vs Grey Gold Cement Ltd., 2014(34) S.T.R. 809(A.P) The Hon'ble Andhra Pradesh High Court affirmed the order of the larger bench in ABB ltd.
18 November 2012 Ultratech Cement Ltd. v. CCE, 2014(35) S.T.R. 752(Tri-Del.) The Hon'ble Tribunal held that the Assessee would be entitled to credit if the sales were FOR destination sales. Further followed in 2015(37) S.T.R 364(Tri.) dated 03.09.2014 , Final Order No. 57887/2017 dated 09.11.2017, Final Order No. 58421/2017 dated 07.12.2017 28 November 2013 CCE V. Vesuvious India Ltd., 2014(34) S.T.R 26(CAL.) The Hon'ble Calcutta High Court held that transportation service till the customer premises was not admissible. 12 March 2013 Lafarge India Ltd. vs. CCE, 2014(307) ELT 7(Chattisgarh) The Hon'ble Court held that credit is available only if freight is integral part of price of goods.
11 July 2014 The Cenvat Credit Rules, 2004 were amended to include the definition of 'place of removal' 3 September 2014 Ultratech Cement Ltd. vs CCE, 2015(37) S.T.R. 364(Tri.-Del) Followed the previous order at 2014(35) S.T.R. 751(Tri.-Del.) 20 October 2014 The Department issed a circular which reiteratd the circular datd 23 August 2007, that the place where the sale takes place is the place of removal.
29 June, 2016 CCE v. Ultratech Cement Ltd., 2016(44) S.T.R. 227(Kar) The Hon'ble High Court held that credit on FOR destination sales is admissible Appealed before SC (Civil Appeal No. 11261 of 2016) 17 January 2018 CCE, Belgaumn vs. Vasavadatta Cement Ltd., 2018(11)GSTL 3(SC) The Hon'ble Supreme Court held that the credit would be admissible for the period prior to the amendment in 2008
-01 February 2018 CCE & ST vs. Ultratech Cement Ltd. 2018(9) GSTL 337(SC) The Hon'ble Supreme Court held that credit is inadmissible for the period after the amendment in 8 Appeal No. E/50161, 50421/2018-EX(DB) 2008 05 February 2018 Commissioner vs. The Andhra Sugar Ltd., 2018 TIOL 45 SC CX The Hon'ble Supreme Court held that the credit would be admissible for the period prior to the amendment in 2008
8. Ld. Ld. Advocate further submitted that the various decisions of High Courts and Tribunal, were also in the favour of appellant, and therefore, in such a circumstances it cannot be held that the appellant had any malafide intention to avail the Cenvat Credit GTA service, on reliance was placed on decision of Continental Foundation JT. Venture v. CCE, Chandigarh, 2007 (216) ELT 177(SC)
9. On the other hand, the Ld. AR defended the impugned order.
10. After going through the fact, we find that the issue is no longer res integra and in view of changed definition of input service after April, 2008 the appellant is liable to pay service tax as per the prevalent rate only. As far as imposition of penalty is concerned, we do not find this to be a fit case in view of the following judgments of Hon'ble Tribunal, wherein it has been held that the extending period is not invocable in such cases where Cenvat Credit was held to be admissible to the asssessee and the issue was settled only after the decision of Hon'ble Supreme Court in case of Ultratech Cement (supra).
Therefore, we don't find this to be a fit case for imposition of penalty.
11.Accordingly, allow the appeal in above terms.
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Appeal No. E/50161, 50421/2018-EX(DB)
(Pronounced in open court on 20.11.2018)
(Ajay Sharma) (Bijay Kumar)
Member (Judicial) Member (Technical)
Tejo