Custom, Excise & Service Tax Tribunal
M/S.Lafarge India Pvt. Ltd vs Cce, Raipur on 4 January, 2011
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL,
WEST BLOCK NO.II, R.K. PURAM, NEW DELHI-110066.
SINGLE MEMBER BENCH
Excise Appeal No.E/1570/2009-SM
Date of Hearing: 04.01.2011
Date of Decision: 04.01.2011
(Arising out of Order-in-Original No.COMMISSIONER/RPR/14/2009 dated 19.02.2009 passed by the CCE, Raipur)
For approval and signature:
Honble Mr.M.Veeraiyan 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 authoritative report or not?
3
Whether Their Lordships wish to see the fair copy of the Order?
4
Whether Order is to be circulated to the Departmental authorities?
M/s.Lafarge India Pvt. Ltd. Appellant
Vs.
CCE, Raipur Respondent
Present for the Appellant: Shri P.K.Sahu, Advocate
Present for the Respondent: Shri K.P.Singh, SDR
Coram: Honble Mr.M.Veeraiyan, Member (Technical)
ORDER NO._______________
PER: M.VEERAIYAN
This is an appeal against the order of the Commissioner No.COMMISSIONER/RPR/14/2009 dated 19.02.2009,by which a sum of Rs.5,57,224/- as cenvat credit was disallowed and ordered to be recovered alongwith interest and penalty of Rs.10,000/- was imposed.
2. Heard both sides extensively.
3. The appellants are manufacturer of cement and clinker. They are clearing clinker to another unit of their own. The cement is being partly sold form the depots. In certain cases, the appellants are selling the cement to different buyers on FOR basis. The dispute relates to the credit of service tax taken by the appellants in respect of the goods transport agency utilized by them in transporting the cement to the buyers on FOR basis. The original authority held that GTA services utilized for this purpose could not be treated as input service and accordingly denied the credit and demanded duty as aforesaid.
4. Learned Advocate for the appellants submits the following.
(a) In respect of the disputed consignments, the sale was on FOR basis; that the delivery of the cement was at the premises of the buyers; and that the ownership was transferred to the buyers only at the premises of the buyers.
(b) As per section 4 (3) (c) of Central Excise Act, 1944, the place of removal means ------------------ the premises from where the excisable goods are to be sold after their clearance from the factory and in the present case the goods are actually sold at the premises of the buyers and therefore the buyers premises should be treated as place of removal.
(c) As the terms of contract is for supply on FOR basis, the transfer of possession also takes place at the buyers premises.
(d) Assessable value of cement is to be determined based on retail prices and therefore whether assessable value includes the freight incurred from the factory premises to the premises of the buyers is not relevant.
(e) For considering whether the certain services are input services or not, whether the valuation of the goods is under Section 4 or Section 4A or by any other mode is irrelevant as held by the Tribunal in the case of L.G. Electronics (India) (P) Ltd. vs. CCE reported in 2010 (19) STR 340 (para 6). Also relying on the decision of the Honble High Court of Punjab & Haryana in the case of Ambuja Cements vs. UOI reported in 2009 (236) ELT 431 (paras 11,12 & 13), he submits that inasmuch as the sale in their case is on FOR basis, the transfer of possession and ownership takes place at the premises of the buyers, and therefore, the GTA services utilized for the same should be treated as input service.
(f) The definition of input service is wide enough and includes not only the activities related to the manufacture but any activity in relation to the business and term business is wide enough to cover transportation form the factory premises to the premises of the buyers. In this context, he relies on the decision of the Honble Bombay High Court in the case of Coca Cola India Pvt.Ltd. vs. CCE, Pune-III reported in 2009 (242) ELT 168 (Bom.) (paras 24,25 & 26).
5. Learned SDR reiterated the findings and reasoning of the Commissioner. He also drew my attention to the invoices raised by the appellants on one of the buyers M/s.Punj Lloyd Ltd. and submits that they are not paying entry tax mentioned in the invoices, as seen from endorsement that entry tax not paid which appears to be consolidated amount relating to several invoices. This may be relevant for determining the claim regarding the transfer of possession and ownership.
6.1. I have carefully considered the submissions from both the sides and perused the records. At the outset, it is it to be remembered that the terms input and input service are relative terms. The yarn, which is a final product of spinning factory, will be input for weaving factory and grey fabrics woven by a weaving factory is final product for them but will be input for the processing factory. Similarly, what is output service by one will become input service for other.
6.2. Keeping the above basic principle in mind, I proceed to consider the facts of the present case. The appellant is a manufacturer of cement and clinker. The appellants are procuring several inputs like lime stone and gypsum and transportation involved in bringing those inputs are obviously input service in respect of business conducted by the appellant.
6.3. Clinker and cement are final products as far as the appellants are concerned. The appellants are selling the cement to several buyers for example to M/s.Punj Lloyd Ltd. Cement is an input for the buyers like M/s.Punj Lloyd Ltd. If a question arises as to whether the GTA services used from the factory of the appellant to the premises of buyers M/s.Punj Lloyd Ltd. will be input service for the business activity of M/s.Punj Lloyd Ltd., there can be no doubt that the said GTA services are input services for M/s.Punj Lloyd Ltd.
6.4. I am not able to appreciate that the same service could be considered as input service for the supplier of the cement as well as recipient of the cement.
7. The claim that the definition of the input service includes any business activity by the appellants cannot be accepted unconditionally. If the appellants clear the cement on sale at the factory gate to a buyer and the buyer arranges the transportation, obviously transportation is not claimed to be input service by the appellant. Merely on the ground that they have arranged the transportation in the present case as per the sale contract, they cannot be permitted to claim the transportation as an input service. In other words, for the final products, namely, cement cleared by them, GTA services are being claimed as input services in certain cases and not in all cases.
8. The submission of the Advocate that the mode of valuation whether under Section 4 or Section 4A or other mode of valuation is not relevant for the purpose of determining and whether certain services are input services or not is certainly valid. Therefore, if the views canvassed by the Advocate is accepted, in a case where the goods are subject to valuation in terms of Section 4, it would amount to treating transportation involved as input service and consequently the assessable value should include cost of transportation which is not envisaged under Section 4.
9.1. The submission that buyers premises ought to be treated as place of removal in respect of goods manufactured by the appellants is farfetched. No doubt there is extended meaning given to the term the place of removal. Place of removal in terms of Section 4 (3) (c) 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) 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. 9.2. Reading the above definition, in the context of the appellants transaction, it cannot lead to a conclusion that the appellants are selling the excisable goods at the premises of the various buyers. It is not the case like milk vendor coming and selling at the doorstep!
10. The submission that the GTA service used for outward transportation from the factory gate to the buyers premises should be treated as input service therefore has to be rejected. The decision relied upon by the learned Advocate in the case of Coca Cola (India) Pvt.Ltd, refers to in para 25 a situation where use of brand name was treated as part of the business activity. In para 26 and 27 of the said decision, certain general views have been expressed about the scope of business activity, which may not be applicable to the facts of the present case. The decision of the Honble High Court of Punjab & Haryana in the case of Aambuja Cement related to the case where the sale was on FOR destination basis and the assessable value included in the freight upto the buyers premises which is not the case in the present case.
11. However, considering the nature of dispute, I do not find any justification for sustaining the penalty on the appellant.
12. The appeal is disposed of by upholding the demand of duty alongwith interest and setting aside the penalty.
(Pronounced in the open court) (M.VEERAIYAN) MEMBER (TECHNICAL) mk 6 8