Custom, Excise & Service Tax Tribunal
Ms Solara Active Pharma Sciences Ltd vs Commissioner Of Gst&Amp;Cce(Trichy) on 22 July, 2019
IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL
SOUTH ZONAL BENCH, CHENNAI
E/40182/2019
[arising out of Order-in-Appeal No.112/2018-TRY[ST], dated 16.05.2018
passed by the Commissioner of GST & Central Excise (Appeals), Coimbatore]
M/s.SOLARA ACTIVE PHARMA SCIENCES LTD. APPELLANT
Versus
COMMISSIONER OF GST & CENTRAL EXCISE, TRICHY RESPONDENT
Appearance:
For the Appellant Ms. S. Sridevi, Adv. For the Respondent Ms. T. Ushadevi, DC (AR) CORAM:
Hon'be Smt. Sulekha Beevi C.S, Member (Judicial) Date of hearing/decision 22-07-2019 FINAL ORDER NO. 40947 / 2019 Brief facts are that the appellants are 100% E.O.U. holding Central Excise registration and engaged in the manufacture of organic chemicals falling under Chapter 29 of CETA, 1985. During the period from Dec.'06 to Sept.'11, the appellants availed credit of Rs.4,20,423/- being the service tax paid on various services. After litigations, the Commissioner (Appeals) allowed credit in respect of all 2 E/40182/2019 services except that of GTA Services [Rs.1,23,326/-] and Courier Services [Rs.49,680/-]. The matter reached the Tribunal and vide Final Order No.42144/2016, dated 09.11.2016, the matter was remanded to the adjudicating authority to decide in terms of the Tribunal decision in the case of M/s. Lucas TVS Ltd., reported in 2016 (43) S.T.R.418. In de novo adjudication, the Assistant Commissioner allowed the credit and set aside the demand in respect of the GTA Services [Outward] as well as Courier Services [Outward]. Against this, the department filed appeal before Commissioner (Appeals), who vide order impugned herein held that the place of removal is the factory gate and that appellants are not eligible for the credit after 01.03.2008. After setting aside the demand of credit prior to 0103.2008, the matter was again remanded to the adjudicating authority. Aggrieved by such order, the appellants are now before the Tribunal.
2. The learned counsel Ms. S. Sridevi appeared on behalf of the appellant. She adverted to the different purchase orders issued by the buyers of the goods client and submitted that the understanding was that the price has to be paid on C.I.F. basis. Thus, F.O.B. value for export includes carriage [freight charges] and insurance, which is borne by the appellants. Though, the understanding was to deliver the goods at the destination of the buyer, the appellant availed the service tax credit of the freight charges [GTA Services] upto the port only. This is clear from the consignment notes issued. This consignment note would show that the transportation of the goods was undertaken from Cuddalore [factory gate] to Chennai Airport only. The goods in 3 E/40182/2019 this appeal were exported by Air. The appellants availed GTA Services from the factory at Cuddalore to the airport at Chennai, upon which they have availed credit of servicer tax paid on freight charges. She submitted that it is clear from the figures reflected in the annexure to the show-cause notice itself that the appellants have not availed credit of the air freight charges. The credit being eligible only on the GTA Services, the appellant has availed credit from the factory to the port only. The discussion made by the Commissioner (Appeals), that it is not whether clear the appellant has availed credit upto the destination [i.e., Frankfurt, Montreal etc.,] is factually and legally incorrect. The goods having been exported by Air, it is clear that GTA Services could be availed only upto the port.
2.1 The appellant-Company being a 100% E.O.U. has exported their finished products. As per Circular No.999/6/2015-Cx., dated 28.02.2015, the Board has clarified that in case of export of goods, the transfer of property could be said to have taken place at the port where the shipping bills are filed by manufacturer-exporter. Where the goods are further carried to the destination, the appellant is eligible for the credit on the freight charges paid for transportation from the factory upto the Airport. She relied upon the decision in the case of M/s. Mahindra Reva Electric Vehicles (P) Ltd., Vs CCE & ST, Bangalore-I reported in 2017 (3) G.S.T.L. 75 (Tri.) to argue that the outward freight upto the port of export was eligible on GTA Services. M/s. Premier Conveyors P. Ltd., Vs Commissioner of Central Excise, Thane-I was also relied by learned counsel. It is further submitted by learned counsel that the department has clarified by Circular No.1065/4/2018-Cx., dated 08.06.2018, that in case of export of 4 E/40182/2019 goods the Circular dated 28.02.2015 would still apply. She, therefore, prayed to restore the decision of the adjudicating authority and to set aside the order passed by Commissioner (Appeals). 2.2. She also explained that the original authority had rightly considered the issue as to credit of service tax availed on Courier Charges. These were availed only for the purpose of sending documents and sample goods. Hence the credit is eligible being an input service.
3. The learned Authorised Representative for the Revenue Ms. T. Ushadevi, DC (AR) supported the findings in the impugned order. She submitted that as per the purchase orders produced by the appellant it is seen that the F.O.B. has been arrived by the appellant including cost and insurance. However, the appellants have to deliver the goods at the foreign destination as seen from the purchase orders. Though, they content that the GTA Services have been availed only upto the port and that the service tax credit has been availed only for GTA Services upto the port, it is not clear from the documents whether they have not included the Air freight charges also, while availing the credit. She adverted to the consignment note referred to by the learned counsel for the appellant and submitted that in single consignment note, the transportation charges are Rs.3,800/- whereas, as per annexure to the show-cause notice for the period Apr.'09 to Mar.'10 itself, the service tax liability for GTA Services comes to Rs.46,168/-. The quantity of chemicals exporter by the appellants as seen from the purchase orders, bill of entries is very meager quantities. It cannot by any stretch of imagination be contended that 5 E/40182/2019 the appellant had incurred such high amount for GTA Services for transportation of such meager quantities of goods utp to the port. She argued that this would indicate that the appellant has included the Air freight charges also in GTA Services for availing the credit, and the Commissioner (Appeals) has rightly remanded the matter to verify the same.
3.1 The learned Authorised Representative for the Revenue relied upon the decision of Hon'ble Apex Court in the case of M/s. Ultratech Cements Ltd., reported in 2018 (9) G.S.T.L.337 (S.C.) and argued that the credit beyond the place of removal is not eligible after 01.03.2008. With regard to Circular dated 28.02.2015, the learned Authorised Representative countered that after issuance of Circular dated 18.06.2018, the said Circular cannot apply. Further, the period involved in the present case is prior to the Circular dated 28.02.2015, and, therefore, not applicable to the present case.
4. Heard both sides.
5. The issue is whether the appellants are eligible for credit on GTA Services [Outward] Rs.1,23,326/- and Courier Services [Outward] Rs.49,680/-
5.1 On perusal of the purchase orders, it is seen that the F.O.B. value is arrived by including the freight charges and insurance by the appellant. Thus, the appellant is obliged to deliver the goods at the buyer's premises which is destination outside India. It is contended by appellants that they have availed service tax on GTA Services upto the port only. The learned Authorised Representative has raised 6 E/40182/2019 strong objection stating that it is not clear whether the Air freight have been included in the GTA charges for availing the credit. She has also referred to the observations made by the Commissioner (Appeals) in paras 5, 6 and 7 of the order. She has also reflected to the figures in the show-cause notice to argue that such high amount of service tax cannot be co-related with the meager quantities of goods/chemicals transported by the appellant. That, therefore, the said GTA Services must have included the freight charges for transport of the chemicals to foreign destinations.
5.2 I have given my anxious consideration to these rival contentions. On perusal of the show-cause notice, I do not find any allegation that the appellant has included the Air freight charges also for availing the credit on GTA Services. In fact, the show-cause notice has been issued proposing to disallow the credit on GTA Services and Courier charges alleging that these are not input services as per the definition. The present contention of the department that appellants have included the Air freight charges also in the GTA Services ought to have been alleged in the show-cause notice. Further, as per the definition of GTA Service, it includes only transportation of goods by road. It has to be stated that this is the second round of litigation. A fresh ground raised in the show-cause notice is put forward by Commissioner (Appeals) to deny the credit. Again, Commissioner (Appeals), who is a fact finding authority in case of doubt ought to have called for the report from the Range Superintendent. Instead, the matter is again remanded for another round of litigation. The department cannot deny credit on assumptions and presumptions. In the Circular dated 28.02.2015, the department has clarified that in 7 E/40182/2019 case of export of goods, the place of removal would be the port. The relevant para is reproduced as under:-
"4. In most of the cases, therefore, it would appear that handing over of the goods to the carrier/transporter for further delivery of the goods to the buyer, with the seller not reserving the right of disposal of the goods, would lead to passing on of the property in goods from the seller to the buyer and it is the factory gate or the warehouse or the depot of the manufacturer which would be the place of removal since it is here that the goods are handed over to the transporter for the purpose of transmission to the buyer. It is in this backdrop that the eligibility to Cenvat Credit on related input services has to determined.
5. Clearance of goods for exports from a factory can be of two types. The goods may be exported by the manufacturer directly to his foreign buyer or the goods may be cleared from the factory for export by a merchant exporter.
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."
5.3 The appellants have pleaded in the reply to show-cause notice itself that they have availed credit only from the factory upto the airport. There is nothing brought out by the department to discredit this contention made by the appellants. Commissioner (Appeals) has on assumptions concluded that the appellants have included the freight charges also for avaiing credit on GTA Services. The Tribunal in the case of M/s. Mahindra Reva Electrical Vehicles (p) Ltd., (supra) has considered the very same issue on outward freight upto the port of export when the F.O.B. price shows the inclusion of freight charges borne by the appellant. Following the said decision, I am of the view that the disallowance of credit on GTA Services cannot sustain and requires to be set aside which I hereby do.
6. The Courier Services having been availed by the appellant mainly for outward transportation of documents as well as samples of the product, the said service qualifies as an input service having 8 E/40182/2019 availed in relation to manufacture of finished products. I am of the view that the disallowance of credit on GTA Services and Courier Services is unjustified and requires to be set aside, which I hereby do.
7. The impugned order is set aside. The appeal is allowed with consequential reliefs, if any.
(Dictated and pronounced in open court) (SULEKHA BEEVI C.S) MEMBER (JUDICIAL ksr 23-07-2019 9 E/40182/2019 DRAFT Remarks I II III Date of 22.07.2019 dictation Draft Order 22.07.2019
- Date of typing Fair Order 23.07.2019 Typing Date of 23.07.2019 number and date of dispatch 10 E/40182/2019