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2022 (7) TMI 1240 - AT - Central ExciseDemand of Central Excise duty under Section 11D of CEA - Reversal of Cenvat Credit - Cenvat credit of rent-a-cab services used by the employees and customers of the appellant for business purposes - input services or not - freight charges paid for transport of goods from the appellant s premises to the customer s premises when goods were sold on FOR basis to the customers by the appellant. Demand of Central Excise duty under Section 11D of CEA - It is the case of the Department that the appellant has recovered this amount from its customers as representing excise duty and, therefore, the same needs to be deposited in the exchequer - HELD THAT - The agreement and the invoices that the buyer was fully aware that the goods were fully exempted and no excise duty was liable to be paid. In fact, the buyer was required to provide an excise duty exemption certificate to the appellant to avail the benefit of exemption notification. However, the buyer also agreed to pay to the appellant an amount equal to 7% which it paid under Rule 6(3)(1). However, both the agreements and the invoices inaccurately mentioned this as excise duty reversal - The invoices also indicate that the excise duty is exempted under Notification NO. 3/2004. Further, below the excise duty reversal @ 6% in the invoice, it is mentioned in amount paid under Rule 6(3)(i) of CCR . Needless to say, since this is not an amount of excise paid by the appellant and the buyer M/s Navayuga Engineering Company Limited will not be entitled to Cenvat credit of the amount so paid. However, that matter is beyond the scope of this appeal. What is important for this appeal is whether the appellant has collected the amount as representing Excise duty from its customers which does not appear to be the case from the agreement and from the invoices - this part of the demand cannot be sustained and needs to be set aside. Cenvat credit of rent-a-cab services used by the employees and customers of the appellant for business purposes - input services or not - HELD THAT - The High Court in the case of COMMISSIONER OF CENTRAL EXCISE, CUSTOMS AND SERVICE TAX, VADODARA VERSUS TRANSPEK INDUSTRY LTD. 2017 (10) TMI 86 - GUJARAT HIGH COURT has decided that rent-a-cab services in respect of cab used by the employees of the assessee is an input service and Cenvat credit is available on it. Demand of Rs. 3,95,550/- towards central excise duty on freight charges of goods sold on FOR basis to the customers premises - HELD THAT - The issue is now settled by the Supreme Court in the case of COMMISSIONER OF CUSTOMS AND CENTRAL EXCISE, NAGPUR VERSUS M/S ISPAT INDUSTRIES LTD. 2015 (10) TMI 613 - SUPREME COURT that the place of removal in every case has to be only the place relatable to the seller and it cannot be the buyer s premises even though the sale may be completed at the buyer s premises when goods are sold on FOR destination basis. The place of removal continues to be the seller s premises whether it be the factory gate or depot or any other place relatable to the seller. In terms of Section 4 of the Central Excise Act, value of the goods is the transaction value of the goods for delivery at the time and place of removal. The freight incurred from the place of removal to the buyer s premises cannot, therefore be includible in the assessable value. Penalty - HELD THAT - All the three demands are not sustainable on merits, the penalty also needs to be set aside. Appeal allowed - decided in favor of appellant.
Issues Involved:
1. Demand under Section 11D of the Central Excise Act. 2. Denial of Cenvat credit on input services. 3. Demand of central excise duty on freight charges of goods sold on FOR basis. Issue-wise Detailed Analysis: Demand under Section 11D: The appellant, M/s Jindal Tubular India Limited, supplied MS pipes to M/s Navayuga Engineering Company Limited under an exemption notification. The appellant chose to pay 6%/7% of the value of the final products under Rule 6(3) of the Cenvat Credit Rules (CCR), 2004. The Department contended that the appellant recovered this amount as representing excise duty, necessitating its deposit under Section 11D of the Central Excise Act. However, the appellant argued that the amount was not collected as excise duty but as an obligation under Rule 6(3)(i) of CCR. The Tribunal referred to the Larger Bench decision in Unison Metals Vs. Commissioner of Central Excise, which established that amounts collected under Rule 57CC of the Modvat Rules (similar to Rule 6(3)(i) of CCR) need not be deposited under Section 11D if not represented as excise duty. The Tribunal also noted the CBEC Circular No. 870/08/2008-CX, which clarified that amounts paid under Rule 6 of CCR do not attract Section 11D. Consequently, the Tribunal concluded that the appellant did not collect the amount as excise duty, thus setting aside the demand under Section 11D. Denial of Cenvat Credit on Input Services: The impugned order denied Cenvat credit of Rs. 4,13,596/- for rent-a-cab services used by the appellant's employees and customers. The appellant cited the Gujarat High Court's decision in Commissioner of Central Excise, Customs & Service Tax, Vadodara Vs. Transpek Industry Ltd., which held that rent-a-cab services used by employees for business purposes qualify as "input service" eligible for Cenvat credit. The Tribunal, following the Gujarat High Court's judgment, ruled that the appellant is entitled to Cenvat credit for rent-a-cab services, thereby setting aside the denial. Demand of Central Excise Duty on Freight Charges: The appellant supplied goods on a FOR destination basis, raising the question of whether freight charges should be included in the assessable value for excise duty. The Supreme Court in CCE & Customs Vs. Roofit Industries Ltd. held that for FOR destination sales, the place of removal is the buyer's premises. However, in CCE, Nagpur Vs. Ispat Industries Ltd., the Supreme Court clarified that the place of removal must be the seller's premises, not the buyer's, even for FOR sales. The Tribunal referred to the CBEC Circular No. 1065/4/2018-CX, which aligned with the Ispat Industries decision, stating that the place of removal is always the seller's premises. Consequently, the Tribunal ruled that freight charges from the seller's premises to the buyer's premises are not includible in the assessable value, setting aside the demand. Conclusion: The Tribunal found all three demands unsustainable on merits and set aside the penalties. The impugned order dated March 19, 2019, was thus set aside, and the appeal was allowed with consequential relief to the appellant.
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