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2017 (6) TMI 803 - AT - Central ExciseInterpretation of statute - meaning and scope of the expression place of removal employed in the definition of input service under Rule 2(l)of CCR,2004 - CENVAT credit - input services - GTA service (outward freight) - place of removal - manufactured goods are cleared and delivered at the place of buyer - Held that - taking note of Rule 5 of Valuation Rules, 2000 it is observed that the place of removal and the place of delivery are distinct places and the freight charges incurred from the place of removal to the place of delivery has to be excluded from the assessable value of the goods - where freight charge is incurred in delivery of the goods by the manufacturer, place of removal invariably has to be the place from where goods are ultimately sold by the manufacturer. No doubt, by virtue of Rule 2(t) of CENVAT Credit Rules, 2004 the meaning of expression not defined therein has been borrowed from the Central Excise Act and the Rules made thereunder, but it has to be read in the context in which it has been used. Even though the meaning of place of removal has to be considered to be factory gate, however, the Courts while interpreting the meaning of input service laid emphasis on the condition of sale so as to ascertain whether the services rendered by the assessee was in relation to delivery of the manufactured/finished goods at the place of the buyer. In most of these appeals, no specific finding has been recorded analyzing the evidences as to whether sale of the manufactured goods is at the factory gate or at the premises of the buyer as per the agreement for sale, purchase Order, invoice etc. - Thus, all these appeals need to be remanded to the original authority to examine the said aspect and then consider the eligibility of CENVAT Credit on outward freight (GTA services) - appeal allowed by way of remand.
Issues Involved:
1. Admissibility of CENVAT Credit on GTA service (outward freight) for the period prior to and after 01.04.2008. 2. Interpretation of "place of removal" in the context of CENVAT Credit Rules, 2004. 3. Application of Supreme Court judgment in the Ispat Industries case to the determination of "place of removal." 4. Binding nature of CBEC circulars on the interpretation of "place of removal." Issue-wise Detailed Analysis: 1. Admissibility of CENVAT Credit on GTA service (outward freight) for the period prior to and after 01.04.2008: The appeals concern the admissibility of CENVAT Credit on the Service Tax paid on outward freight (GTA service). For the period prior to 01.04.2008, the issue has been settled by the jurisdictional High Court in the case of CCE Vs Parth Poly Woven Pvt. Ltd, which allowed such credit. For the period after 01.04.2008, the eligibility of CENVAT Credit on GTA services depends on the determination of the "place of removal," which is based on the agreement of sale between the manufacturer and its buyer. 2. Interpretation of "place of removal" in the context of CENVAT Credit Rules, 2004: The term "place of removal" is not explicitly defined in the CENVAT Credit Rules, 2004. By virtue of Rule 2(t), its meaning is borrowed from Section 4(4)(c) of the Central Excise Act, 1944. The Tribunal has often remanded cases to the original authority to ascertain the "place of removal" based on the agreement of sale, which determines whether the service tax paid on outward freight qualifies for CENVAT Credit. 3. Application of Supreme Court judgment in the Ispat Industries case to the determination of "place of removal": The controversy arose after the Supreme Court's judgment in CCE Nagpur Vs Ispat Industries Ltd, which discussed the "place of removal" in the context of determining assessable value under Section 4 of the Central Excise Act, 1944. The Supreme Court clarified that the "place of removal" could not be the buyer's premises. However, the Tribunal noted that this interpretation, meant for assessing the value of goods, should not be mechanically applied to deny CENVAT Credit on outward freight, especially when the sale agreement stipulates delivery at the buyer's premises. 4. Binding nature of CBEC circulars on the interpretation of "place of removal": The CBEC issued circulars (dated 23.08.2007 and 20.10.2014) clarifying the interpretation of "place of removal." These circulars indicate that the place of removal should be determined by the terms of the sale contract, specifically whether the sale is ex-factory or at the buyer's premises. These circulars are binding on the Revenue, and the Tribunal emphasized their importance in implementing CENVAT provisions. Judgment Summary: The Tribunal heard extensive arguments from both sides. The key issue was the interpretation of "place of removal" for determining the eligibility of CENVAT Credit on outward freight. The Tribunal noted that the meaning of "place of removal" should be understood in the context of the sale agreement, which determines where the transfer of property in goods occurs. The Tribunal found that the consistent approach by the CBEC, even after the Ispat Industries judgment, supports this interpretation. The Tribunal remanded the appeals to the original authority to examine the sale agreements and other relevant documents to determine the actual "place of removal." The original authority is to consider whether the sale was at the factory gate or the buyer's premises and then decide on the eligibility of CENVAT Credit on outward freight accordingly. All ancillary issues raised in the appeals are also to be considered afresh. Conclusion: The impugned orders were set aside, and the appeals were remanded for re-examination of the "place of removal" based on the sale agreements. The Tribunal directed that a reasonable opportunity for hearing be provided to the appellants. All issues were kept open for reconsideration.
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