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TMI Blog2010 (4) TMI 322X X X X Extracts X X X X X X X X Extracts X X X X ..... or the Appellant. Shri B.K. Singh, Jt. CDR, for the Respondent. [Order per: Rakesh Kumar, Member (T)]. - The Appellant are engaged in manufacture of electronic and electrical goods such as Colour Television sets Computer Monitors, Air Conditioners, Refrigerators etc. chargeable to Central Excise Duty. They are also providing certain taxable services like such as repair and maintenance, installation and commissioning, consulting engineers etc. for which also they are registered with the Central Excise Department. Besides providing the above taxable services, they also pay service tax as service recipient in respect of goods transport agency (GTA) service received by them. The Appellant avail the Cenvat credit of the Central Excise Duty paid on the goods and service tax paid on the inputs services under Cenvat Credit Rules, 2004 (hereinafter referred to as CCR, 2004). The period of dispute in this case is from October 2004 to September 2005 and January 2005 to February 2007. 1.1 The appellant clear their goods for sale from the factory gate and also transfer the goods to their depots from where the same are despatched to their customers. During January 2006 and April 2006, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3,58,717/- on the appellant under Rule 25(1) of Central Excise Rules, 2002 readwith Section 11AC of the Excise Act for short payment of education cess; (c) confirmed the Cenvat credit demand of Rs. 6,21,39,585/- alongwith interest on it at the applicable rate under the provisions of Rule 14 of the Cenvat Credit Rules, 2004 read with Section 11A and 11AB of Excise Act; and (d) imposed penalty of Rs. 6,21,39,585/- on the appellant under Rule 15 of the Cenvat Credit Rules, 2004, read with Section 11AC of the Excise Act. 1.4 The appellant filed an appeal to the Tribunal against the above order of the Commissioner alongwith a stay application. The stay application was decided by the Tribunal vide order No. 381/09-EX dated 24-4-09 (2009 (245) E.L.T. 854 (Tri.-Del.)] by which the Tribunal ordered the appellant to deposit a sum of Rs. One crore within the stipulated period and subject to deposit of this amount the requirement of pre-deposit of the balance amount of duty, interest and penalty would stand waived and recovery thereof stayed till the disposal of the appeal. Against this order of the Tribunal, the Appellant filed an appeal to Hon'ble Allahabad High Court under Section 35G ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m depots, are on FOR destination basis, the goods are transported to the dealers from factory gate depots at the Appellant's risk and expenses of transportation and transit insurance are integral part of the price of the goods sold. Therefore the sale takes place at the customer's premises and it is the customer's premises which have to be treated as the "place of removal" and since, transportation from depot factory gate to the customer's premises is covered by the definition of input service', as given in Rule 2(1) of CCR, 2004, the Commissioner has wrongly disallowed the Cenvat credit by treating only the factory gate as the place of removal. (3) As per Rule 2(l) of the CCR, 2004, words and expression used in these rules are not defined but defined in the Excise Act or Finance Act, 1944 shall have meaning assigned to them in those Acts. In view of this, the expression "place of removal" in the definition of "input service" in rule 2(1) must be given the meaning in term of its definition in Section 4 of the Excise Act. Since the Sales of the Appellants are on FOR basis at the customer's premises, it is the customer's premises which have to be treated as the place of removal, no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . For the same reason, there is no justification for imposition of penalty under Rule 15 of Cenvat Credit Rules, 2004 read with Section 11AC of Central Excise Act. (8) As regards the short payment of education cess amounting to Rs. 3,58,717/- the same was due to computational mistake and there was no intention to evade the same, and as such, the demand for the same is also time barred. 2.2 Shri B.K. Singh, the learned Jt. CDR, made the following submissions: (1) Since the duty on the finished goods claimed to have been sold on FOR destination basis has not been paid on value including the freight from factory gate depots to the customer's premises, but has been paid on value determined under Section 4A with reference to MRP minus abatement, Cenvat credit of service tax paid on the GTA service availed for transportation from depots/factory gate to customer's premises would not be available MRP minus abatement is not the same as FOR price. In case of payment of duty under Section 4A, Board's Circular No.97/8/07-S.T., dated 23-8-07 becomes irrelevant. (2) Under Section 37(2)(xviaa) of the Excise Act, Central Government can frame rules to provide for credit of service tax levia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ference to the declared MRP minus abatement. According to the Appellant, their all the sales of the finished goods to their customers dealers are on FOR destination basis and the transport and transit insurance is arranged by them whose cost is integral part of the price charged from the customers and risk of damage to the goods or loss of goods during transit is of the Appellant. In other words, according to the appellant, the sale takes place at the customer's premises and accordingly the price charged by them from the customers is on FOR basis. It is on this basis that the Appellant claim that the place of removal of the goods is the customer's premises. The point of dispute is as to whether the Appellant would be eligible for Cenvat credit of service tax paid on the GTA service availed for transportation of the goods up to the customer's premises. According to the Appellant, since the sale take place at the customer's premises, it is the customer's premises which is the "place of removal" within the meaning of this expression as defined under Section 4(4)(c) of the Excise Act and since the definition of "input service", as given in Rule 2(1) of Cenvat Credit Rules, 2004 covers ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alue determined as per the provisions of Section 4A. 4. CCR, 2004 and its predecessor rules have been framed by the Central Government under the powers vested under Section 37(2) of the Excise Act, Clause (xvi a) and (xvi aa) of which empower the Central Government to frame rules to provide for - "(a) credit of duty paid or deemed to have been paid on the goods used in, or in relation to the manufacture of excisable goods; and (b) credit of service tax leviable under Chapter V of the Finance Act, 1944 paid or payable on taxable services used in or in relation to, the manufacture of excisable goods." 4.1 Rule 2(1) of the CCR, 2004 defines "input service" as under:- "Input service" means any service - (i) used by a provider of taxable service for providing an output service, or (ii) used by the manufacturer, whether directly or indirectly, in or in relation to the manufacture of final products and clearance of final products from the place of removal, and includes services used in relation to setting up, modernization, renovation or repairs of a factory, premises of provider of output service or an office relating to such factory or premises, advertisement or sales p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt, it is not possible to accept the contention that because the levy of excise is a levy on goods manufactured or produced in India, the value of an excisable article must be limited to the manufacturing cost plus manufacturing profit; and (d) the price of an article is related to its value and into that value have poured several components including those which have enriched its value and given the article its marketability in the trade and therefore the expenses incurred on account of several factors which have contributed to its value upto the date of sale, which apparently would be the date of delivery, are liable to be included in its value for assessment of duty and consequently when the sale is effected at the factory gate, expenses incurred by the assessee up to the date of delivery on account of storage charges, outward handling charges, after sales ser vice charges, marketing and selling organisation expenses including advertisement expenses would be includible in the assessable value. Thus the assessable value of excisable goods, for the purpose of charging duty at an ad valorem rate, is not confined to manufacturing cost and manufacturing profit. It would include all ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or for payment of service tax on output service, has the character of a value added tax. With effect from 12-5-2000, the name of "Central Excise duty' on excisable goods was changed to Central Value Added Tax (CENVAT) by amendment to Section 3 of the Central Excise Act, 1944. Hon'ble Bombay High Court, in case of Coca Cola din Pvt, Ltd. v. CCE, Pune-III (supra) while considering the question of eligibility of the Appellant - a manufacturer of soft drink concentrates, for Cenvat credit of service tax paid on advertisement and publicity expenses incurred for promotion of the sales of Aerated waters, manufactured by various bottlers using their soft drink concentrates, keeping in view - (a) the principles regarding valuation of excisable goods that flow from Apex Court's judgment in case of Union of India and others v. Bombay Tyre International Ltd. and others (supra) and specially para 49 of the judgment; (b) the system of Cenvat credit of excise duty paid on input goods and capital goods and of service tax' paid on input services being available to a manufacturer which can be utilised towards payment of duty as finished products; and (c) rechristening the central excise dut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Cenvat Credit Rules, 2004 as reproduced above, it will be seen that while the main definition of the input service with regard to manufacturers covers any service used by a manufacturer, whether directly or indirectly in or in relation to the manufacture of final products and clearance of the final products from the place of removal, the inclusive part of the definition specifically covers "inward transportation of inputs or capital goods and outward transportation up to the place of removal". Thus, outward transportation of finished goods up to the place of removal is specifically covered by the definition of "input service". Now question arises to what is the "place of removal" for the purpose of Cenvat Credit Rules. Though, there is no definition of this expression in the Cenvat Credit Rules, Rule 2(t) of the Cenvat Credit Rules states that words and expressions used in these rules are not defined but defined in the Excise Act or the Finance Act, 1994 shall have meanings respectively assigned to them in those acts. The expression "place of removal" is defined in Section 4(3)(c) of the Excise Act and, therefore, in view of the provisions of Rule 2(t) of the CCR, 2004, the defin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... udgment in case of Gujarat Ambuja Cements Ltd. v. CCE, Ludhiana reported in 2007 (6) S.T.R. 249 (Tri. - Del.) = 2007(212) E.L.T. 410 (Tri.-Del.) has clarified as under:- "Issue Upto what stage a manufacture/consignor can take credit of service tax paid on goods transported by road? Comment This issue has been examined in great detail by the CESTAT in the case of M Gujarat Ambuja Cements Ltd. v. CCE, Ludhiana [2007 S.T.R. 249 (Tri.-Del.]. In this case, CESTAT has made the following observations:- "the post sale transport of manufactured goods is not an input for the manufacturer/consignor. The two clauses in the definition of input services take care to circumscribe input credit by stating that service used in relation to the clearance from the place of removal and service used for outward transportation upto the place of removal are to be treated as input service. The first clause does not mention transport service in particular. The second clause restricts transport service credit upto the place of removal. When these two clauses are read together, it becomes clear that transport service credit cannot go beyond transport upto the place of removal. The two clauses, the one ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... moval' does not pose much problem. However, there may be situations where the manufacturer consignor may claim that the sale has taken place at the destination point because in terms of the sale contract/agreement (i) the ownership of goods and the property in the goods remained with the seller of the goods till the delivery of the goods in acceptable condition to the purchaser at his door step; (ii) the seller bore the risk of loss of or damage to the goods during transit to the destination; and (iii) the freight charges were an integral part of the price of goods. In such cases, the credit of the service tax paid on the transportation up to such place of sale would be admissible if it can be established by the claimant of such credit that the sale and the transfer of property in goods (in terms of the definition as under Section 2 of the Excise Act as also in terms of the provisions under the Sale of Goods Act, 1930) occurred at the said place". 5.2 Hon'ble Punjab Haryana High Court in case of Ambuja Cements Ltd. v. Union of India reported in 2009 (14) S.T.R. 3 (P H) = 2009 (236) E.LT. 431 (P H) = 2009 (TIOL) 110 - HC - P H - ST relying upon the above-mentioned circular o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act, 1944. The expression 'place of removal' has been defined under Section 4 of the Central Excise Act, as per which it is (a) a factory (in case of factory gate sale); (b) a warehouse (in case goods permitted to be stored without payment of duty); or (c) a depot (in case of depot sale). Therefore, in case excisable goods are sold from depot after their clearance from the factory, the manufacturer is eligible to take credit of service tax paid on transportation of goods up to such depot. 2. In this regard a doubt has arisen as to whether a manufacturer manufacturing and clearing goods on payment of duty at specified rates (for example cement) or on the basis of valuation with reference to retail sale price (for example refrigerators), and selling the goods from a depot, is also eligible to take credit of service tax paid on transportation of goods up to such depot. The doubt appears to be based on reasoning that since such goods are not charged to duty on the basis of valuation under section 4 of the Central Excise Act, the definition of the expression 'place of removal' given in that section would not apply in case of such goods. 3. The matter has been examined at the level ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... entral Excise Act. If a service is covered by the definition of Input service' and the finished product is not 'exempted goods', the credit of service tax paid on such input service has to be allowed irrespective of whether the duty on the finished product has been paid at a specific rate or at ad valorem rate on the assessable value determined under Section 4 or under Section 4A or on tariff value fixed under Section 3(2) of the Excise Act, as so long as the finished product is subjected to duty and the credit of the input stage duty is allowed, the tax will retain the character of value added tax. The reason for this is that while ideally in a tax system with character of VAT, the input goods/services as well as finished product must be subjected to tax at a uniform ad valorem rate on their sale value in which case, the net tax collected after allowing credit of input stage duty will be exactly the tax on the value addition, in practice, it is not always possible, but even if the input goods/services and the finished products are taxed at different ad valorem rates or at specific rates, once the input stage duty credit is allowed, on overall basis, the net tax collected would be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d 23-8-07 of the Board, the Cenvat credit of service tax paid on the GTA service availed for transportation of the nods up to the customer's premises would have to be allowed. 8. The second issue involving a very small amount, is regarding short payment of education cess. While the appellant do not dispute the short payment claiming the same due to computational mistake, they have raised the plea of time bar claiming that during the period of dispute, the ER-1 returns were being filed regularly and, if, there was short payment due to computational mistake, it was possible for the Department to inform the appellant regarding short payment. The Commissioner in paras 15.3 and 15.4 of the order-in-original, while discussing this point has not given any finding as to on what basis the Appellant can be accused of wilful misstatement, suppression of facts or contravention of provisions of Central Excise Rules with intent to evade the payment of duty, so as to invoke the proviso to Section 11A(1) of the Excise Act. Since, as discussed the matter with regard to Cenvat credit is being remanded, the Commissioner is directed to examine the issue regarding limitation in respect of demand shor ..... X X X X Extracts X X X X X X X X Extracts X X X X
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