2024 (4) TMI 32 - HC - Central Excise

CENVAT Credit - place of removal for the GTA Services provided under a F.O.R sale contract is the manufacturer's premises and not the place where the goods are sold or not - rejection of appeal filed by the Appellant solely on the basis of the judgment of Apex Court in the case of CCE v. Ultra Tech Cements Ltd. 2018 (2) TMI 117 - SUPREME COURT - levy of interest under Section 11AB of CEA - HELD THAT - It is not in dispute that for a manufacturer/consignor, the eligibility to avail credit of the service tax paid on the transportation during removal of excisable goods would depend upon the place of removal as per the definition contained of the said term in the Central Excise Act, 1944. Such place of removal is the place where the sales take place - It is also not in dispute that in an F.O.R sale which the appellant was doing in the instant case, freight charges form part of assessable value, the ownership of goods remains with seller till delivery at customer s doorstep, seller bears risk of loss or damage to the goods during transit to the destination, and property in the goods is not transferred till delivery. So outward transportation qualifies as input service and is eligible for CENVAT Credit - The sale being of gases manufactured by the appellant, due to the peculiar nature, sale happens at the buyer s premises and admittedly such sale is on F.O.R basis. In Ranadey Micronutrients etc. vs. Collector of Central Excise 1996 (9) TMI 124 - SUPREME COURT , the Supreme Court held that in view of Section 37B of the Central Excise Salt Act, 1944, instructions issued by the Board in order to ensure uniform practice of assessment of excisable goods throughout the country get statutory status and significance, and they are binding on officers of the Central Excise Department. The Tribunal was not justified in holding that place of removal for the GTA Services provided under FOR sale contract is the manufacturer s premises and not the place where the goods are sold; that the Tribunal was not justified in holding that the GTA services in the present case are being received beyond the place of removal and therefore not covered within the definition of Input Service under Rule 2(1) of CANVET Credit Rules, 2004. The impugned orders are set aside - appeal allowed.

Summary

Issues Involved:
(a) Place of removal for GTA Services under F.O.R sale contract.
(b) Definition of 'Input Service' under Rule 2(1) of CENVAT Credit Rules.
(c) Reliance on the Apex Court judgment in CCE v. Ultra Tech Cements Ltd.
(d) Levy of interest u/s 11AB of the Act.

Summary:

Issue (a): Place of Removal for GTA Services:
The Tribunal held that the place of removal for GTA Services under a F.O.R sale contract is the manufacturer's premises. However, the High Court found this incorrect, stating that in an F.O.R sale, the ownership and risk remain with the seller until delivery at the buyer's premises, making the buyer's premises the place of removal.

Issue (b): Definition of 'Input Service':
The Tribunal concluded that GTA services received beyond the place of removal do not qualify as 'Input Service' under Rule 2(1) of CENVAT Credit Rules. The High Court disagreed, citing that in F.O.R sales, outward transportation qualifies as 'Input Service' since the ownership and risk remain with the seller until delivery, making it eligible for CENVAT Credit.

Issue (c): Reliance on Apex Court Judgment:
The Tribunal relied on the Supreme Court judgment in CCE v. Ultra Tech Cements Ltd. The High Court noted that this judgment did not consider F.O.R contracts and emphasized the CBIC circular which carved out exceptions for F.O.R destination sales, aligning with the judgments in CCE, Mumbai-III vs. Emco Ltd. and CCE vs. M/s Roofit Industries Ltd.

Issue (d): Levy of Interest u/s 11AB:
The Tribunal upheld the levy of interest u/s 11AB of the Act. The High Court, however, set aside this decision, aligning with the principle that in F.O.R contracts, the place of removal is the buyer's premises, making the outward transportation eligible for CENVAT Credit.

Conclusion:
The High Court allowed the appeal, setting aside the impugned orders, and held that the Tribunal was not justified in its conclusions regarding the place of removal and the definition of 'Input Service'. The pending applications were also disposed of, with no costs awarded.