2012 (8) TMI 627 - AT - Central Excise

Non eligibility for claim of Cenvat credit - the service of GTA availed for transportation of clinker from Sonadih plant to Nipania railway siding for onward transportation by rail to Jojobera plant of the appellant company - Held that - The definition of place of removal in Section 4 (3) (c) can be adopted for Cenvat Credit Rules only in those cases where the rate of duty is ad-vaiorem and the duty is charged on value determined under Section 4 - In this case, the duty on the goods - clinker is at specific rate and hence the definition of place of removal in Section 4 (3) (c) would be of no relevance. As the places on removal from where the duty is liable to be paid which in this case, is the factory gate of Sonadih factory, as the duty on clinker becomes payable at the time of removal from Sonadih factory therefore, the GTA service for transportation of clinker from Sonadih factory to Nipania depot, having been availed after the removal of the clinker from the factors, is prime facie not covered by the definition of input service - against assessee.

Summary

Issues:
1. Eligibility of Cenvat credit on outward transportation of cement and clinker.
2. Interpretation of "place of removal" for determining the eligibility of Cenvat credit.
3. Applicability of Board's Circulars on Cenvat credit rules.

Analysis:

Issue 1: Eligibility of Cenvat credit on outward transportation
The appellant, a cement manufacturer, availed Cenvat credit on service tax paid for outward transportation of cement and clinker. The department disputed the eligibility of Cenvat credit amounting to Rs. 61,04,934 and issued a show cause notice for recovery and penalty. The Commissioner partially confirmed the demand, imposing a penalty on the appellant. The appellant contended that the transportation service should be treated as an input service, citing relevant rules and circulars to support their case.

Issue 2: Interpretation of "place of removal"
The primary dispute revolved around whether the transportation service from Sonadih plant to Nipania depot qualifies as an input service under the definition of "place of removal." The appellant argued that the factory gate of Sonadih plant should be considered the place of removal, while the department asserted that the factory of Jojobera should be deemed the place of removal. The Tribunal analyzed the definition of "place of removal" under the Central Excise Act and its applicability to Cenvat Credit Rules, particularly in cases of specific duty rates.

Issue 3: Applicability of Board's Circulars
The Tribunal examined the relevance of Board's Circulars, specifically Circular No. 137/3/06-CX and Circular No. 97/8/2007-ST, in determining the admissibility of Cenvat credit on transportation services. It questioned the applicability of the definition of "place of removal" under Section 4 (3) (c) of the Central Excise Act to cases where duty is charged at specific rates or tariff values fixed under Section 3 (2). The Tribunal concluded that the definition of "place of removal" under Section 4 (3) (c) may not apply to cases with specific duty rates, supporting its decision with a prima facie view that the transportation service in question did not qualify as an input service.

In its final decision, the Tribunal ruled against the appellant, directing them to deposit the disputed Cenvat credit amount. The requirement of pre-deposit of interest and penalty was waived upon compliance. The stay application was disposed of accordingly, emphasizing the importance of establishing a prima facie case for the waiver of demands in such matters.