Custom, Excise & Service Tax Tribunal
Rcl Cement Ltd vs Commissioner Of Central Excise, ... on 25 August, 2016
IN THE CUSTOMS, EXCISE & SERVICE TAX APPELLATE
TRIBUNAL, KOLKATA
EASTERN ZONAL BENCH: KOLKATA
Appeal No. E/327/2011
(Arising out of Order-in-appeal No. 07/SH/CE(A)/HGY/11 dated 14/02/2011 passed by the Commissioner of Customs, Central Excise (Appeals), Guwahati.
FOR APPROVAL AND SIGNATURE
HONBLE SHRI H.K.THAKUR, MEMBER (TECHNICAL)
1. Whether Press Reporters may be allowed to see
the Order for publication as per Rule 27 of the CESTAT
(Procedure) Rules, 1982?
2. Whether it should be released under Rule 27 of the
CESTAT(Procedure) Rules, 1982 for publication in any
Authorative report or not?
3. Whether Their Lordship wishes to see the fair copy
of the Order?
4. Whether Order is to be circulated to the Departmental
Authorities?
RCL Cement Ltd.
Applicant (s)/Appellant (s)
Vs.
Commissioner of Central Excise, Shillong.
Respondent (s)
Appearance:
Shri Ravi Raghavan, Adv & M/s Satabadi Chatterjee, Advocate for the Appellant (s) Shri S. Mukhopadhyay, Suptd (AR) for the Revenue (s) CORAM:
Honble Shri H.K.Thakur, Member(Technical) Date of Hearing/Decision: 25.08.2016 ORDER No.FO/A/75907/16 Per Shri H.K.Thakur This appeal has been filed by the appellant against OIA No. 07/SH/CE(A)/GHY/11 dt 14/2/2011 passed by Commissioner (Appeals) Guwahati as first appellant authority. Under this OIA dt 14/2/2011 first appellate authority has predominantly upheld the OIA dt 29/7/2009 passed by the Adjudicating authority.
2. Ravi Raghavan (Advocate) and Ms Stabadi Chatterjee (Advocate) appeared on behalf of the appellant. Sh. Ravi Raghavan argued that issue involved in the present appeal is whether service tax credit with respect to outward transportation is admissible to the appellant or not. That appellant is a cement manufacturer where Central Excise duty is paid on MRP basis. That goods are delivered to the doorsteps of the customers & transit insurance is also borne by the appellant. That all elements of cost are included in the MRP and the delivery becomes an FOR destination basis transaction. That any loss in transit is borne by the appellant and ownership of goods till delivery of goods remains with the appellant. Those in case goods are not taken delivery by the customer than appellant has every right to sell the goods to another buyer. That all the conditions prescribed under CBEC circular No. 97/8/2007-ST dt 23/8/2007 are fulfilled. That the pattern of sale of all Cement manufacturers is the same and in the case of other cement manufacturers such credit has been allowed. Learned Advocate relied upon, interalia, the following case laws in support:-
(i) Birla Corporation Ltd Vs CCE & ST [2016 TIOL-2082 CESTAT]
(ii) CCE Dehradun Vs M/s Forace Polymers Pvt. Ltd.
(iii) Ambuja Cement Ltd Vs UOI [2009 (236) ELT 431 (P&H)]
(iv) Ultra tech Cement Ltd Vs CCE & ST Rohtak [2015 (37) ELT 364 (Tri.-Del)].
3. Sh. S. Mukhopadhyay Suptd (AR) appearing for the Revenue relied upon the Apex Courts decision in the case of CCE & Cus Nagpur Vs. Ispat Industries Ltd [2015 (324) ELT 670 (S. C) ] to argue that buyers premises can not be taken as a place of removal. Learned AR thus strongly defended the order of the first appellate authority and argued that Cenvat Credit on outward freight has been correctly denied.
4. Heard both sides & perused the case records. The issue involved in these proceedings is whether Cenvat Credit of services of outward transportation from the factory of the appellant to the buyers premises is admissible to the appellant or not. It is the case of the appellant that excisable goods Cement are assessed to Central Excise duty on MRP basis which includes all expenses upto the place of delivery of goods to buyers premises and in all other Cement manufacturers such credit is allowed. Appellant interalia, has relied upon the case law of P & H High Court Ambuja Cements Ltd Vs Union of India (Supra). One of the substantive question of law before Honable P & H high Court in this relied upon case law, was :-
1. Whether the service of transportation up to the customers doorstep, in the case of FOR destination sales where the entire cost of freight is paid and borne by the manufacturer, would be input service within the meaning of Rule 2(l) of the CC Rules?
2 4.1. While deliberating on the above issue following observations were made by the P & H court while deciding the case against the Revenue:-
7.?Having heard learned counsel at a considerable length and perusing the paper book and statutes with their able assistance, we are of the view that the questions of law deserve to be answered in favour of the assessee-appellant and against the revenue. It is undisputed that the appellant being a manufacturer and consigner has paid service tax on the value of goods transported by it by road. The Central Board of Excise and Customs (CBEC) has issued a circular dated 23-8-2007 dealing with the issue concerning up to what stage manufacturer/consigner could take credit on the service tax paid on goods transported by it by road. The issue, in fact, has emerged out of the order of the Tribunal passed in the case of the appellant itself. The Board has opined that the phrase place of removal has to be determined by taking into account the facts of each case. According to the circular, the expression place of removal has been defined by Section 4 of the 1944 Act and according to sub-rule (t) of Rule 2 of the CC Rules, if any words or expression used in those rules are not defined but are defined in the 1944 Act or the 1994 Act then they are to be given the same meaning for the CC Rules as assigned to them in those Acts. Accordingly, reliance on Section 4 of the 1944 Act has been made where place of removal has been defined as under :-
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.
8.?It is clear from the definition 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. The circular further contemplates compliance of certain conditions where the sale has taken place at the destination point. The aforementioned part of the circular reads as under :-
......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.
9.?It is well settled that the circulars issued by the Board are binding and aims at adoption of uniform products. In that regard reliance has been rightly placed on the judgment of Honble the Supreme Court in the case of Paper Products Ltd. (supra) and such circulars are binding on the department. Placing reliance on earlier judgments of the Supreme Court in the cases of CCE v. Usha Martin Industries, 1997 (94) E.L.T. 460 (S.C.) = (1997) 7 SCC 47; Ranadey Micronutrients v. CCE, 1996 (87) E.L.T. 19 (S.C.) = (1996) 10 SCC 387; CCE v. Jayant Dalal (P) Ltd., 1996 (88) E.L.T. 638 (S.C.) = (1997) 10 SCC 402 and CCE v. Kores (India) Ltd., 1997 (89) E.L.T. 441 (S.C.) = (1997) 10 SCC 338, Honble the Supreme Court concluded in para 5 as under :-
5.?It is clear from the abovesaid pronouncements of this Court that, apart from the fact that the Circulars issued by the Board are binding on the Department, the Department is precluded from challenging the correctness of the said Circulars even on the ground of the same being inconsistent with the statutory provision. The ratio of the judgment of this Court further precludes the right of the Department to file an appeal against the correctness of the binding nature of the Circulars. Therefore, it is clear that so far as the Department is concerned, whatever action it has to take, the same will have to be consistent with the Circular which is in force at the relevant point of time.
10.?It is, thus, evident that the revenue is precluded from challenging the correctness of the circular even on the ground of the same being inconsistent with statutory provisions. It goes further to limit the right of the revenue to file an appeal against the correctness of the binding nature of the circular. Therefore, there is no escape from the conclusion that the circular is binding on the revenue.
11.?The only question then is whether the appellant fulfills the requirement of circular. The first requirement is that the ownership of the goods and the property therein is to remain with the seller of the goods till the delivery of the goods in acceptable condition to the purchaser at his door step. The aforesaid condition has to be considered to be fulfilled because the supply of cement by the appellant to its customer is FOR destination. The appellant also bears the freight in respect thereof up to the door step of the customer. The freight charges incurred by it for such sale and supply at the door step of the customer are subjected to service tax which is also duly paid by the appellant. Moreover, the definition of expression input service is available in Rule 2(l) of the CC Rules, which reads thus :-
2(l) input service means any service, -
(i) used by a provider of taxable service for providing an output 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 repairs 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, recruitment 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;
12.?The input service has been defined to mean any service used by the manufacturer whether directly or indirectly and also includes, inter alia, services used in relation to inward transportation of inputs or export goods and outward transportation up to the place of removal. It has also remain un-controverted that for transportation purposes insurance cover has also been taken by the appellant which further shows that the ownership of the goods and the property in the goods has not been transferred to the seller till the delivery of the goods in acceptable condition to the purchaser at his door step. Accordingly, even the second condition that the seller has to bear the risk of loss or damage to the goods during transit to the destination stand fulfilled.
13.?The third condition that the freight charges were integral part of the excisable goods also stand fulfilled as the delivery of the goods is FOR destination price. This aspect has been specifically pointed out in para 2.2 of the reply dated 12-4-2006 given to the show cause notice. Therefore, we are of the view that the first question is liable to be answered in favour of the assessee and against the revenue.
5. Learned AR has relied upon the case law of Apex Court CC & CE Nagpur Vs Ispat Industries Ltd (Supra) to argue that Customers premises can not be the place of removal & that no Cenvat Credit on outward freight will be admissible. The period of dispute before Apex Court in the above case was 28/9/1996 to 31/3/2003 when Section -4 (3) (c) (iii) was not existing. This Section 43 (c) (iii) of the Central Excise Act 1944 was inserted with effect from 14/5/2003 by Section -136 of the Finance Act 2003, therefore, after 14/5/2003 the place of removal could also be the destination point of delivery where goods are sold. Secondly, Apex Court was dealing with the unamended Sec 4 (3) (c) of the Central Excise Act 1944 on valuation. Thirdly before the Apex Court the issue was neither the admissibility of Cenvat Credit nor an interpretation of Sec 4 (3) (c) (iii) of the amended Sec 4 of the Central Excise Act 1944. Under the above factual matrix Apex Court ruling that buyers premises can not be the place of removal is not applicable to the facts existing in this appeal.
5.1 Above observations are also fortified by the view taken by CESTAT Delhi case law in the case of CCE Dehradun Vs M/s Forace Polymers Pvt Ltd (Supra) where following observations have been made in Para- 6 :-
6 The main Thrust in the Revenues appeal is the finding of the Honble Supreme Court in Ispat Industries Ltd. (Supra) regarding place of removal. The Honble Supreme Court was examining the question of valuation of excisable goods with reference to inclusion or otherwise, the freight charges from the factory gate to the buyers premises. In the said case, admittedly, the goods were sold ex factory. The Revenue intended to include the freight element in the assessable value. The Honble Supreme Court, after Examining, the relevant provisions under Section 4 as existing during the period 28/09/1996 to 1.7.2000 and from 1.7. 2000 to 31.03.2003 held that under no circumstances, can buyers premises be the place of removal for the purpose of Section 4 on the facts of the present case. As is evident from the analysis and conclusion of the Honble Supreme Court the matter under examination was clearly valuation of excisable goods with specific reference to the transport charges from the factory. The issue involved in the present appeal is availability of cenvat credit on the outward transportation of finished goods. admittedly, during the relevant period, there is no definition of place of removal under Cenvat Credit Rules, 2004. The definition available under Section 4 has been taken to interpret the same for credit purposes. Here, in the present case, the respondent is clearly selling their goods on the bssis of purchase order, which clearly stipulates that 100% payment will be only on receipt of goods delivered at the premises of the buyer. Upto that the insurance and transport of the goods is at the vendors cost. In these factual circumstances, the respondent have undertaken the transportation and the value of such transportation is apparently included for the purpose of discharging central excise duty on the finished goods. the freight was integral part of the value in the present case has been admitted by the original Authority. Such being the case, it is not open to Revenue to rely on the decision of the Honble Supreme Court as stated above to hold that the respondent are not eligible for cenvat credit on freight element though admittedly, such freight forms part of the assessable value. Such assertion will result in self- contradiction.
6. In the present proceedings transit insurance & outward freight is also borne by the appellant. Ownership of the goods till their delivery at the footsteps of the buyer remains with the appellant and service tax on freight is also paid by the appellant. Under the existing factual matrix deliveries of cement in the present proceedings have to be considered as on FOR destination basis and conditions of CBEC Circular No. 97/6/2007- ST dt 23/8/2007 are fulfilled as per the ratio laid down by P & H High Court in Paras 11 to 13 in the case law Ambuja Cement Ltd. Vs. UOI (Supra).
7. In view of the above observations & settled proposition of law credit of service tax paid on the outward freight during the relevant period was correctly taken by the appellant.
8. Appeal filed by the appellant is allowed by setting aside OIA dt 14/2/2011, passed by the first appellate authority.
(Operative part of the order already pronounced in the court.) (H.K.THAKUR) MEMBER (TECHNICAL) T.K 2 Appeal No.E/327/2011