Custom, Excise & Service Tax Tribunal
05 vs E/42532/2013 on 2 February, 2016
IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL S. No. Appeal No. Appellant Respondent
Order-in-Appeal
01. E/41540/2013 CCE, Chennai II M/s. Lucas TVS Ltd.
Nos.101 to 112/2013 (M-II), dt - 26.03.14 02. E/42303/2013 M/s. CPC Pvt. Ltd. CCE, Coimbatore Nos.247&248-13, dt - 07.08.13 03. E/42443/2013 M/s. Deejay Plastics Pvt Ltd Chennai II No.202/2013(M-II), dt - 10.09.2013 04. E/42476/2013 M/s. Vaigai Industries CCE, Trichy No.113/2013, dt - 22.08.2013 05. E/42532/2013 M/s. L G Balakrishnan & Bros Ltd CCE, Coimbatore No.329-13, dt - 25.09.13 06. E/42533/2013 M/s. L G Balakrishnan & Bros Ltd CCE, Coimbatore No.330-13, dt - 25.09.13 07. E/40443/2014 M/s. Taj Mahal Tobacco Co Pvt Ltd CCE, Trichy Nos.13&14/2014 dt - 06.02.2014 08. E/40569/2014 M/s. Alkraft Thermotechnologies Pvt Ltd Chennai II No.06/2014(M-II), dt - 07.01.2014 09. E/40707/2014 M/s. United Metal Industries Chennai I No.09/2014(M-I), dt - 06.01.2014 10. E/40708/2014 M/s. United Metal Industries Chennai I No.10/2014 (M-I), dt - 06.01.2014 11. E/40766/2014 M/s. Bannari Amman Sugars Ltd CCE, Salem No. 04/2014 SLM-CEX, dt - 16.01.2014 12. E/40767/2014 M/s. Bannari Amman Sugars Ltd CCE, Salem No. 05/2014 SLM-CEX, dt - 16.01.2014 13. E/40780/2014 M/s. ITC Limited CCE, Salem No. 17/2014 CEX, dt - 17.01.2014 14. E/40857/2014 M/s. Pricol Ltd CCE, Salem No.27/2014 C.E, dt - 22.01.2014 15. E/40884/2014 M/s. Orient Abrasives Ltd. CCE, Salem No.62/2014 CE, dt - 07.02.2014 16. E/40886/2014 M/s. Steel Authority of India Limited CCE, Salem No.48/2014 CE, dt - 05.02.2014 17. E/41089/2014 M/s. Supreme Petrochem Ltd Chennai I No.14/2014 (M-I), dt - 18.02.2014 18. E/41090/2014 M/s. Supreme Petrochem Ltd Chennai I No.15/2014 (M-I), dt - 18.02.2014 19. E/41091/2014 M/s. Supreme Petrochem Ltd Chennai I No.16/2014 (M-I), dt - 18.02.2014 20. E/42197/2014 M/s. Balmer Lawrie &Co Ltd CCE, Chennai I No.69/2014 (M-I), dt -07.07.2014 21. E/42250/2014 M/s. Indrad Auto Components Chennai III No.152/2014 (M-III), dt - 09.07.2014 22. E/41234/2015 M/s. National Plastic Technologies Ltd Chennai IV No.04/2014 (M-IV), dt - 03.11.2014 23. E/41235/2015 M/s. National Plastic Technologies Ltd Chennai IV No.05/2014 (M-IV), dt - 03.11.2014 24. ST/42556/2013 M/s.Unique Shell Mould India Pvt Ltd CCE, Coimbatore No. 310-13, dt - 10.09.2013 25. ST/42557/2013 M/s. Unique Shell Mould India Pvt Ltd CCE, Coimbatore No.311-13, dt - 10.09.2013 26. ST/42558/2013 M/s. Unique Shell Mould India Pvt Ltd CCE, Coimbatore No. 312-13, dt - 10.09.2013 27. ST/40900/2014 M/s. Arkema Peroxides India Private Limited CCE, Pondicherry No.25/2014 (P), dt - 10.02.2014 SOUTH ZONAL BENCH, CHENNAI Appearance: For the Asessees Shri Raghavan Ramabhadran, Adv. Ms. D. Naveena, Adv. Ms. Minchu Mariam Punoose, Adv. Shri N. Viswanathan, Adv. Shri M. Kannan, Adv. Shri S.R. Sankareshwaran, Adv. Ms. K. Ramya, Adv. Ms. Kamna Shrikanth, Adv. Shri S. Kannapan, Cons. Shri R. Parthasarathy, Cons. Shri K. Suresh Rao, Cons. Ms. R. Krithika, Adv. For S.Nos. 1,5,6,13 & 21 2 3 4 7 8 9-10, 14,17 to 19, 22-23 11-12 15-16 20 24-26 27 For the Revenue Shri B. Balamurugan, AC (AR) CORAM: Honble Shri D.N. Panda, Judicial Member Date of hearing/decision 02-02-2016 FINAL ORDER NO. 40353-40379 / 2016
Learned counsels appearing for the respective appellants agree that if following two questions are answered that shall serve the purpose of the present appeals on a common issue and all other issues may be left open for decision by the Adjudicating Authority in the respective appeals. On behalf of all the counsels, learned counsel Shri Raghavan Ramabhadran, Adv. and Shri N. Viswanathan, Adv., framed the following two questions for answer:-
(i) Whether the goods cleared at the factory gate, depot or any other place of removal, (the expression of which is defined in Section 4(3) of the Central Excise Act, 1944) and delivered such goods at the port of export for export shall entitle the appellants to the Cenvat credit of the service tax paid on transportation of such goods from any of the above places or such tax refundable under Rule 5 of the Cenvat Credit Rules, 2004 wherever the Cenvat credit is not adjustible; and
(ii) Whether Cenvat Credit is admissible in respect of service tax paid on transportation of the goods cleared from the places in question (i) above for delivery at the place of the buyer as per the terms of the contract of sale between the parties prior to 01.04.2008 and thereafter.
2.1 It is submitted on behalf of the appellants that to answer the first question, the material fact is that the appellants are exporters of goods which is not disputed by Revenue. They exported the goods clearing the same from the factory, depot or any other place of removal as the case may be and transported that paying service tax, to the place of export. The service tax so suffered was claimed as Cenvat credit by the exporter-assessees on the ground that the transportation service so availed was input service for export. But that was denied by Revenue. Further, wherever such tax was not adjustable towards Cenvat credit; refund thereof was claimed under Rule 5 of Cenvat Credit Rules, 2004. Such claims were denied by the department without any basis of law.
2.2 Appellants submitted that the law relating to input service as was in force prior to 01.04.2008 enacted in Rule 2 (l) of the Cenvat Credit Rules, 2004 read as under:
Rule 2(l) of Cenvat Credit Rules, 2004
(i) input service means any service, -
(ii) Used by a provider of taxable service for providing an output service; or
(iii) 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 factor 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; [Emphasis supplied] 2.3 Appellants pleaded that transportation service is taxed on reverse charge mechanism under the Finance Act, 1994. Accordingly service tax was payable by the recipient of transport service. In none of the cases in this batch of appeals, the service tax was discharged by the transporter in view of legal position that whoever receives transport services has to pay service tax. Accordingly, the assessees have suffered service tax and claimed Cenvat credit thereof.
2.4 Appellants explains that the concept of upto place of removal was substituted in Rule 2 (l)(ii) of Cenvat Credit Rules, 2004 in place of the term from the place of removal after 01.04.2008 and such term continues to be in statute book, which reads as under:-
Rule 2(l) of Cenvat Credit Rules, 2004
(l) input service means any service,-
(i)?used by a provider of taxable 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, and includes services used in relation to 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, accounting, auditing, financing, recruitment and quality control; coaching and training, computer networking, credit rating, share registry, security, business exhibition, legal services, inward transportation of inputs or capital goods and outward transportation upto the place of removal;
2.5 Appellants submitted that with the above background of law relating to input service, as appearing in statute book, the place where actual delivery of goods takes place occasioning transfer of property in goods thereat, the transport service should be construed to have been provided upto the place of removal. After 11.07.2014, the concept of place of removal was defined by Rule 2(qa) of Cenvat Credit Rules, 2004 to read as under:-
(qa) 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;
According to appellants even the new definition of the term place of removal has not altered the common law relating to sale. Therefore, appellants are still entitled to get the Cenvat credit of the service tax paid on transport service availed to deliver their good at any place of delivery under the terms of the contract.
3. Supporting all the adjudications, Revenue says no Cenvat credit can be granted or refund thereof made when goods are delivered at the port of export or place of buyer. It was also the contention of Revenue that the transport charges incurred by the assessees are post clearance/sales, for which, that cannot be considered as input service. So also their claim does not appeal to common sense. Therefore, there is no question of grant of Cenvat credit or refund thereof to the assessees as the case may be.
4. Heard both sides and perused the records.
5. Before 11.07.2014, the meaning of the exprwessions from the place of removal and upto the place of removal were construed taking help the provision of Central Excise Act, 1944 read with the provision contained in Rule 2(l) of Cenvat Credit Rules, 2004. Thereafter with effect from 11.07.2014 such expression has been defined by the Rule 2(qa) of Cenvat Credit Rules, 2004. At all times, the whole question boils down to what is called place of removal. That question can be answered with reference to Section 19 of Sale of Goods Act, 1930. For convenience of reading, the said section is reproduced as under:-
Section 19 of Sale of Goods Act, 1930
19. Property passes when intended to pass. (1) Where there is a contract for the sale of specific or ascertained goods the property in them is transferred to the buyer at such time as the parties 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.
6. Keeping in view the basic structure of the common law as to ownership of the goods, property therein and transferability thereof, the CBE&C vide its Circular No.999/6/2015-Cx., dated 28.02.2015 came out with guideline as to how to construe the meaning of the term place of removal. So far as the export is concerned, answer is given in para 6 of the circular as under:-
6.? In the case of clearance of goods for export by manufacturer exporter, shipping bill is filed by the manufacturer exporter and goods are handed over to the shipping line. After Let Export Order is issued, it is the responsibility of the shipping line to ship the goods to the foreign buyer with the exporter having no control over the goods. In such a situation, transfer of property can be said to have taken place at the port where the shipping bill is filed by the manufacturer exporter and place of removal would be this Port/ICD/CFS. Needless to say, eligibility to CENVAT Credit shall be determined accordingly. [Emphasis supplied]
7. So far as the normal domestic sale is concerned, the answer is given by para 3 of the circular as under:-
3.? The matter has been examined. It is seen that section 23 of the Sale of Goods Act, 1930 provides that where, in pursuance of the contract, the seller delivers the goods to the buyer or to a carrier or other bailee (whether named by the buyer or not) for the purpose of transmission to the buyer, and does not reserve the right of disposal, he is deemed to have unconditionally appropriated the goods to the contract, and therefore, in view of the provisions of the Section 23 (1) of the Sale of Goods Act, 1930, the property in the goods would thereupon pass to the buyer. Similarly, section 39 of the Sale of Goods Act, 1930 provides that where, in pursuance of a contract of sale, the seller is authorized or required to send the goods to the buyer, delivery of the goods to a carrier, whether named by the buyer or not for the purpose of transmission to the buyer, or delivery of the goods to a wharfinger for safe custody, is prima facie deemed to be a delivery of the goods to the buyer. [Emphasis supplied]
8. It is further observed that Board Circular number 988/12/2014-Cx., dated 20.10.2014 has clarified the issue dealing with the judicial pronouncements as to the place of removal as under:.
(3)? The operative part of the instruction in both the circulars give similar direction and are underlined. They commonly state that the place where sale takes place is the place of removal. The place where sale has taken place is the place where the transfer in property of goods takes place from the seller to the buyer. This can be decided as per the provisions of the Sale of Goods Act, 1930 as held by Honble Tribunal in case of Associated Strips Ltd. v. Commissioner of Central Excise , New Delhi [2002 (143) E.L.T. 131 (Tri.-Del.)]. This principle was upheld by the Honble Supreme Court in case of M/s. Escorts JCB Limited v. CCE, New Delhi [2002 (146) E.L.T. 31 (S.C.)]. [Emphasis supplied]
9. Added to the above, the Boards Circular No.97/8/2007-ST., dated 23.08.2007 has dealt the issue of place of removal in para 8.2 reading as under:-
8.2?In this connection, the phrase place of 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, -
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. [Emphasis supplied]
10. It may be seen that para 8.2 of the Circular No.97/8/2007-ST, dated 23.08.2007, para 3 of the Circular No.988/12/2004-Cx., dated 28.10.2014 and Circular No.999/6/2015, dated 28.02.2015 follow the concept that when property in goods is transferred under the Sale of Goods Act, 1930 as is envisaged by Section 19 thereof, at that point only, removal of the goods from the control of the seller is said to have occurred. Seller parts has right at that point to buyer at that time and detaches detaching himself from his right over the goods. His right accordingly extinguishes. The situations are:-
(1) Where there is a contract for the sale of specific or ascertained goods the property in them is transferred to the buyer at such time as the parties 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.
11. Precisely, sales is outcome of contract of sale of specific or ascertained goods. The property therein is transferred to the buyer at such time as the parties to the contract intend to do so. This is mandate of Section 19 (1) of the Sale of Goods Act, 1930. The intention of the parties is elucidated by sub-section (2) thereof. That can be ascertained having regard to the terms of the contract, the conduct of the parties and circumstances of the case. Sub-section (3) of Section 19 covers a situation not covered by sub-section (2) of Section 19. In such circumstances, Rule 20 to 24 of the Sale of goods Act, 1930 shall apply for ascertaining the intention of the parties as to the time at which the property in goods is to pass to the buyer.
12. The codified provisions in Sale of Goods Act, 1930 in the manner described above has been adopted by Boards Circular No.999/6/2015-CX., dated 28.02.2015 aforesaid. Therefore, there should not be any ambiguity by the Adjudicating Authority to understand the concept of sale where that takes place and the intention of the parties entitling the seller of the goods to the Cenvat credit of the service tax paid on transportation of the goods to the place of export or for delivery thereof at the place agreed between the parties.
13. It may further be stated that Rule 2 (r) of Cenvat Credit Rules, 2004 1994 read with Rule 2 (1)(d) of the Service Tax Rules, 1994 explains mandate of section 68 (2) of the Finance Act. In substance, the service recipient of the transportation is called the person liable to pay service tax. Once service tax is levied under Section 66 of the Finance Act, 1994 that becomes admissible credit for the grant under the scheme of Cenvat Credit Rules, 2004. Therefore, the service tax paid in terms of the reverse charge mechanism under Section 68 of the Finance Act, 1994 read with Section 19 of the Sale of Goods Act, 1930 and the circular aforesaid becomes input service to fulfill contractual obligation. That does not disentitle the tax payer to the Cenvat credit of the service tax paid in respect of transport service availed to make delivery of goods at the destination which otherwise would make the rule of cascading effect otios and export shall be taxable. That is not permitted. Even for this reason also the assessees are entitled to Cenvat credit.
14. So far as the export of goods are concerned, following the aforesaid rationale, the service tax paid availing transportation service shall be admissible to the Cenvat credit or refundable where that is not possible to be set off against future liability. It is also submitted in the Bar that C&F and CHA services were availed for export of the goods. Following the ratio laid down in the case of Western Agencies Pvt. Ltd. Vs Commissioner of Central Excise, Chennai reported in 2011 (22) S.T.R. 305 (Tri. - LB), the service tax paid in respect of those services shall entitle the assessees to avail Cenvat credit.
15. On the aforesaid background of law, both questions are answered accordingly. Learned Adjudicating Authority concerned shall dispose of claims of the appellants on the issues of Cenvat credit granting fair opportunity of hearing to them and examining relevant evidence in each case following aforesaid guidelines shall pass reasoned and speaking order. If there are any other claims other than the Cenvat credit , C&F and CHA service, such issues shall be dealt by the authority in accordance with law considering pleadings, evidence and law.
16. Since interpretation of law was involved in all the cases and conduct of the appellants are not found to be questionable, there shall be no penalty in any of the cases.
17. In the result, all the appeals are remanded to the adjudicating Authorities concerned disposing all the appeals by this common order in the manner indicated above.
(Dictated and pronounced in open court) (D.N. PANDA) JUDICIAL MEMBER ksr 26-02-2016 DRAFT Remarks I II III Date of dictation 02.02.2016 Draft Order - Date of typing 02.02.2016
15..02.2016 18.02.2016 22.02.2016 Fair Order Typing 26.02.2016 Date of number and date of dispatch 29.02.2016