2024 (2) TMI 1393 - AT - Central Excise

CENVAT Credit - input service - place of removal - outward GTA service which is used for transportation of goods from job worker premise to the depot of Principal when the valuation was adopted under section 4A by applying the N/N. 36/2001-CE (NT) - HELD THAT - The place of removal as defined in rule 2(qa) of the 2004 Rules would therefore be the depot or any other place or premises from where the excisable goods are to be sold after the clearance from the factory. The goods are clearly not sold from the factory gate of the appellant as only stock transfer takes place. The appellant cannot be considered to be the owner of the goods as the ownership vests with Parle and it is Parle which ultimately sells the goods from its depot or from the premises of the clearing and forwarding agents. Consequently the appellant would be entitled to claim credit of the service tax on freight paid to goods transport agency on transportation of biscuits from the factory of the appellant to the depot or premises of the clearing and forwarding agents of Parle. The Rajasthan High Court in Mound Trading Company Pvt. Ltd. vs. Commissioner Central Excise Jaipur-I 2019 (7) TMI 1175 - RAJASTHAN HIGH COURT in the matter of the appellant itself held that the appellant could avail CENVAT credit under rule 2(l) of the 2004 Rules on the service tax paid for transportation of the manufactured products from the place of manufacture upto the depot of Parle. In the present case in view of the authorisation dated 23.11.2009 and the terms and conditions submitted at the time of authorisation as also the Agreement dated 07.08.2009 it is clear that no sale took place at the factory gate of the appellant since the goods belonged to Parle and were merely stock transferred to Parle from the factory gate of the appellant. The Excise Invoices issued for removal of goods contained the name of the appellant A/c Parle. The Stock Transfer Notes were issued against Form-F with similar details as the Excise Invoice - Whatever sale to buyers took place was either from the depots of Parle or from the premises of the clearing and forwarding agents of Parle. It appears that these facts were not brought to the notice of the Tribunal or the High Court and that is why a finding was recorded that the goods were not cleared on FOR Destination . The appellant would be entitled to avail CENVAT credit of the service tax paid on outward GTA service for transportation of the goods from the factory of the appellant to the depots of Parle or to the premises of the clearing and forwarding agents of Parle in terms of the authorisation and the Agreement executed between the parties when the valuation is determined under section 4A of the Central Excise Act. The papers may now be placed before the Division Bench of the Tribunal for deciding the appeal on merits.

Summary

Issues Involved:
1. Entitlement to CENVAT Credit on outward GTA service for transportation of goods from job worker to the depot of Principal.

Summary:

Issue 1: Entitlement to CENVAT Credit on outward GTA service for transportation of goods from job worker to the depot of Principal:

The Tribunal referred the issue to a Larger Bench due to conflicting views: "Whether in facts and circumstances as discussed above, the appellant is entitled for the Cenvat Credit on outward GTA service which is used for transportation of goods from job worker premise to the depot of Principal when the valuation was adopted u/s 4A by applying the Notification No. 36/2001-CE (NT)."�

M/s. Sweety Industries (the appellant) is a contract manufacturing unit for Parle Biscuits Pvt. Ltd. The appellant availed CENVAT credit on service tax paid on GTA services for transporting biscuits from its factory to Parle's depots. The department contended that the place of removal is the factory gate of the appellant, not the depot of Parle.

Rule 2(l) of the 2004 Rules defines 'input service' and includes services used up to the place of removal. Rule 2(qa) defines 'place of removal' to include a factory, warehouse, depot, or any other premises from where excisable goods are sold after clearance from the factory. The appellant argued that the place of removal is Parle's depots or clearing and forwarding agents' premises, as the appellant is merely a contract manufacturer.

The Tribunal examined the Agreement dated 07.08.2009 between the appellant and Parle, which stipulated that the appellant would manufacture and deliver biscuits to Parle's depots, and the raw materials and finished goods remain Parle's property. The appellant availed CENVAT credit on inputs and capital goods procured by Parle and used in manufacturing biscuits, including GTA services for outward transportation to Parle's depots.

Two show cause notices were issued alleging wrongful availing of CENVAT credit on GTA services beyond the place of removal. The Assistant Commissioner confirmed the demand, and the Commissioner (Appeals) upheld the order, relying on the Tribunal's decision in M/s. Ultratech Cement Ltd. vs. CCE, Bhavnagar, which held that for goods valued u/s 4A, the place of removal is the factory gate.

The Tribunal referred to the Circular dated 08.06.2018 by the Central Board of Indirect Taxes and Customs, which clarified that the place of removal is generally the 'point of sale' and referred to Supreme Court judgments for guidance. The Tribunal also referred to a Larger Bench decision in M/s. Krishna Food Products vs. The Additional Commissioner of CGST & C. Ex., which held that a contract manufacturer steps into the shoes of the principal manufacturer.

The Tribunal concluded that the place of removal is Parle's depots or clearing and forwarding agents' premises, not the appellant's factory gate. The appellant is entitled to CENVAT credit on service tax paid on GTA services for transportation of goods from the factory to Parle's depots when the valuation is determined u/s 4A.

The reference was answered affirmatively, and the matter was remanded to the Division Bench for a decision on merits.

(Order Pronounced on 14.02.2024)