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TMI Blog2014 (3) TMI 159X X X X Extracts X X X X X X X X Extracts X X X X ..... ed by the Government under section 3(2) for those goods, nor those goods have been notified for determining value on the basis of their MRP under section 4A. Therefore, when the duty on the finished goods is chargeable at ad-valorem rate on value determined under section 4, only then the definition of place of removal as given in section 4(3)(c) can be adopted for the purpose of Cenvat Credit Rules, 2004 and in other cases the natural meaning of the expression place on removal i.e. the place on removal from which the duty on the goods is liable to be paid i.e. the factory gate or Bonded Warehouse, which would have to be adopted. When the place of removal has been defined under section 4(3)(c) for the purpose of determining value under section 4, in our view the definition of place of removal , cannot be adopted for Cenvat Credit Rules, 2004 when the duty on the finished goods is at specific rate or is chargeable at ad-valorem rate on the tariff value fixed under section 3(2) or on value determined under section 4A in which cases the definition of place of removalin Section 4(3)(c) is not relevant. The interpretation of Rule 2(t) of the Cenvat Credit Rules, 2004, which is in c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is the depot, which is the place of removal . The Appellant, however, claimed that their sales were on FOR destination basis and hence it is the customers premises, which have to be treated as the place of removal and they would be eligible for Cenvat credit of service tax paid on the GTA service availed for transportation up to the customer s premises. The Commissioner of Central Excise, Chandigarh vide order-in-original No.45/CE/CHD-II/2011 dt.12/07/11 has not accepted the Appellant s contention regarding their sales being on FOR destination basis and has confirmed the Cenvat credit demand of Rs.1,02,43,969/- along with interest and has imposed penalty of equal amount on the Appellant under Rule 15 (2) of Cenvat Credit Rules, 2004 readwith Section 11AC ibid. 1.3 In the case of two appeals Nos. E/381/2010 E/112/2012 filed in respect of Hirmi, Distt. Raipur (Chhattisgarh) plant of the Appellant company, while some quantity of the cement manufactured is dispatched from the factory directly to the customers on sale, the remaining quantity of the cement is transferred to a dump from where the same is sold to the customers. The period of dispute in these two appeals is from Jan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... depots/dump, as all the sales of the Appellant to their customers are on FOR destination basis and, therefore, in any case, it is the customer s premises which is the place of removal and hence in terms of Board s Circular No. 97/6/07-ST dt. 23.08.07, the Cenvat Credit of service tax paid on the GTA Service availed up to the customer s premises would be admissible, that in any case, denial of Cenvat Credit in respect of GTA Service availed for transportation of cement from factory gate to Dump in Appeal No. E/381.2010 is absolutely incorrect, as in these cases, even if the customers premises are not treated as the place of removal, the Dump would be the place of removal , that during the period prior to 01.04.08 Cenvat Credit of service tax paid on GTA Service availed for transportation from the factory gate to customers premises or from dump/depots to the customers premise would be admissible, irrespective for whether the sales were on FOR destination, basis or otherwise, as during this period, the definition of input service included any service used by the manufacturer whether directly or indirectly in or in relation to the manufacturer for final product and clearance of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ioner s findings that the Appellant s sales are not on FOR destination basis, are incorrect, that rate of duty on cement, other than that packed in 50 Kg. packs and cleared to Industrial Consumers was 8% ad-valorem or Rs. 230 per MT, whichever is higher and earlier, this rate was 14% ad-valorem or Rs. 400 MT, whichever is higher and in respect of such clearances the duty has been paid at ad-valorem rate on the value determined under Section 4 which included freight up to the customer s premises, that in any case, substantial portion of the duty demand for the period from Jan. 05 to March 2009 raised by Show Cause Notice dt. 20.05.09 and part of the duty demand from July 2009 to May 2010 raised by Show Cause Notice dt. 30.11.10 is time barred in as much as during the period of dispute, there were conflicting decisions of different Benches on this issue, till matter was decided by the Larger Bench and hence longer limitation period cannot be invoked for duty demand, in view of Apex Court judgment in case of Continental Foundation Joint Venture Vs. CCE, reported in 2007(216) ELT-177(SC), that for the same reason there is no justification for imposition of equal penalty imposed on Appe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ute in Appeal No. E/381/2010-EX is from Jan.05 to March2009, the period of dispute in Appeal No. E/112/2010-EX is from April09 to March2010 and in Appeal No. E/2440/2011-EX is from July09 to 17.05.2010. 5.1 The definition of input service as given in Rule 2(l) of Cenvat Credit Rules, 2004 during period prior to 01.04.08 was 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 promotion, market research, storage up to the place of removal, procurement of inputs, activities relating to business, such as accounting, auditing, financing recruitment and quality control, coaching and training, computer networking, credit rating, share registry, and security, inward transportation of inputs or capital goods and outward ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and defeat the scheme of the law, that the purpose of interpretation is to find harmony and reconciliation among various provisions that it is well settled that inclusion clause casts its shadow on the main definition and this warrants joint consideration of the main definition and the inclusion clause and since the inclusive portion of the definition restricts the transport service credit up to the place of removal, such Cenvat Credit of service tax paid on GTA Service availed for transportation of finished goods beyond place of removal would not be admissible. Based on this judgment of the Tribunal, Central Board of Excise Custom issued a Circular No. 97/6/07-ST dt.27.08.07 clarifying that:- (a) Cenvat Credit of service tax paid on GTA Service availed for transportation of finished goods would be admissible only up to the place of removal. (b) Since the expression place of removal is not defined in Cenvat Credit Rules,2004, in accordance with Rule2(l) of these Rules, the definition of the place of removal in Section 4(3)(c) of Central Excise Act, 1944 is to be adopted; and (c) Accordingly the Cenvat Credit of service tax paid on GTA Service availed for transportation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nst above judgment of the Larger Bench before the Honble Karnataka High Court and Hon ble Karnataka High Court vide judgment reported in 2011(27) STR-97 (Kar.) has held that order of the Larger Bench does not suffer from any infirmity, but not for the reasons given by the Tribunal in that order. In particular, Hon ble High Court in its judgment did not agree with the decision of the Larger Bench that the expression activity relating to business, in the inclusive portion covers the outward transportation of finished goods from the place of removal(para 32). Similarly Hon ble High Court has neither discussed nor affirmed the Tribunals observation in para 18 19 of its judgment holding that the issue of valuation of the finished goods and the issue of Cenvat Credit in respect of inputs/input services are two different issues independent of each other and that for admissibility of Cenvat Credit of service tax paid on outward transportation of finished goods up to the customers premises, it is not necessary that the cost of freight is part of the transaction value on which the excise duty had been paid. However in para 30 of the judgment, Hon ble High Court after observing that:- (a) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s which fall within the definition of input service has been clearly set out in that portion of the definition. Thereafter, the words activities relating to business an omni-bus phrase is used examples are given. It also includes transportation. The words used are (a) inward transportation of inputs or capital goods (b) outward transportation up to the place of removal. While dealing with inward transportation, they have specifically used the words inputs or capital goods. But, while dealing with outward transportation those two words are conspicuously missing. The reason being, after inward transportation of inputs or capital goods into the factory premises, if a final product emerges, that final product has to be transported from the factory premises till the godown before it is removed for being delivered to the customer. Therefore, input serviceincludes not only the inward transportation of inputs or capital goods but also includes outward transportation of the final product up to the place of removal. Therefore, in the later portion of the definition, an outer limit is prescribed for outward transportation, i.e. up to the place of removal. 7.1 However Honble Gujrat High Cour ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Tribunal in case of ABB Limited and Honble Karnataka High Court and Hon ble Gujrat High Court had taken a contrary view. The Apex Court in case of Continental Foundation Joint Venture, reported in 2007 (216) ELT-177(SC) has held that when there is scope for entertaining doubt on some points on account of conflicting decisions of the Tribunal or High Courts, longer limitation period under proviso to Section 11 A(i) would not be invokable. In view of this we hold that irrespective of the merits of the case, so far as the Cenvat Credit demand for the period prior to 01.04.08 in Appeal No. E/381/2010-EX is concerned, the same is time barred. 9. Demand for period with effect from 01.04.2008. 9.1 For this period, there is no dispute that on account on amendment to Rule (l) of Cenvat Credit Rules, 2004, the Cenvat Credit of service tax paid on the GTA Service availed for transportation of finished goods only up to place of removal is admissible. However on this point the Appellants plea is that all their sales were on FOR destination basis satisfying the criteria prescribed in this regard in the Boards Circular No. 97/6/07-ST dt. 23.08.07, inasmuch as during transit, the risk of lo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... place of removal, this definition of place of removal shall be adopted for Cenvat Credit Rules and accordingly in the cases where the sales are on FOR destination basis and the transfer of ownership takes place at the customer s premises, it is the customer s premises which would be the place of removal and as such the Cenvat Credit of service tax paid on GTA Service availed for transportation of finished goods from the factory gate/depot to the customer s premises would be admissible. In the Board Circular No.137/3/06-EX-4 dt. 02.02.06 it has been clarified that in cases where the goods after removal from the factory to the depot are sold from the depot, it is the depot which would be the place of removal and Cenvat Credit of service tax paid on transportation of finished goods up to such depot would be admissible, irrespective of whether the duty on the finished goods is chargeable at specific rate or at ad-valorem rate or on value determined under section 4A. It is only on the basis of this Circular that the Tribunal in case of LG Electronics Ltd., reported in 2011(19) STR-340 (Tri. Del.) had held that the Cenvat Credit of service tax paid on GTA Service availed for transportat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (t) of these Rules. 9.5 In our view this is a case of legislation by reference and not a case of legislation by incorporation, as Rule 2(t) simply refers to Excise Act or Finance Act without mentioning which Excise Act or which Finance Act. This would have been a case of legislation by incorporation if the provision of Rule 2(t) of Cenvat Credit Rules,2004 had been that place of removal shall have the same definition that as given in section 4(3)(c) of the Central Excise Act, 1944, which is not the case. There is difference between adoption of a particular provision of an earlier statute in a later statute by incorporation and by reference. The incorporation means as if the provision of the earlier Act which has been incorporated into a later Act, has been written in a pen and ink or printed into that Act. The incorporated provision become part of the later statute in which it has been incorporated. In the case of legislation by incorporation, unless the later Act and the earlier Act are supplemental to each other or are in pari materia, the provision incorporated in later statute remains unaffected by repeal or amendment of the parent statute from which the same had been adopted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en in Clause (c) of Section 4(3) of Central Excise Act, 1944, when adopted in Cenvat Credit Rules, 2004, would not have been restricted by the other provisions of section 4, if the definition of place of removal in Section 4(3)(c) of the Central Excise Act, 1944 had been adopted in Cenvat Credit Rules, 2004 by incorporation, but since this is a case of legislation by reference, the meaning of the place of removal as given in section 4(3)(c) of the Central Excise Act, 1944, would have to be determined, keeping in view the other provisions of this section, from which it is clear that the definition of various terms including place of removal given in Section 4(3) are for the purpose of this section only, which is applicable only when the rate of duty chargeable on the excisable goods is with reference to their value and neither the tariff value have been fixed by the Government under section 3(2) for those goods, nor those goods have been notified for determining value on the basis of their MRP under section 4A. Therefore, when the duty on the finished goods is chargeable at ad-valorem rate on value determined under section 4, only then the definition of place of removal as given in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r section 4(3)(c) for the purpose of determining value under section 4, in our view the definition of place of removal , cannot be adopted for Cenvat Credit Rules, 2004 when the duty on the finished goods is at specific rate or is chargeable at ad-valorem rate on the tariff value fixed under section 3(2) or on value determined under section 4A in which cases the definition of place of removalin Section 4(3)(c) is not relevant. 9.6.1 Moreover, the Cenvat Credit Rules have been framed by the Central Government under Section 37(1) of the Central Excise Act, 1944 under delegated legislative powers. The provisions of Cenvat Credit Rules, 2004, therefore, have to be deemed to be in accordance with the provisions of Central Excise Act,1944, not in conflict with the provision of the Act. Therefore when Section 4(3) restricts the scope of the terms defined in this section only for the purpose of Section 4, by invoking Rule 2(t) of Cenvat Credit Rules, 2004, the definition of place of removal in Section 4(3)(c) cannot be applied to cases when the rate of duty on the final product is at specific rate or if it is at ad-valorem rate, the value is determined under Section 3(2) or Section 4A an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al. The net duty liability after adjusting the Cenvat Credit should not vary much with the change of location of the place of removal as:- :- (a) Hon ble Bombay High Court in case of Coca Cola India Pvt.Ltd. Vs. CCE, Pune-III, reported in 2009(242) ELT-168(Bom.), taking note of amendment to Section 3(1) of the Central Excise Act, 1944 w.e.f. 12.05.2000, has, in para 33 of the judgment, held that the above amendment will show that the manifest object of legislature is to levy and collect excise duty as value added tax; and (b) since value added tax operates by taxing final product and giving credit of duty the suffered by the inputs or input services, and since the tax on value addition is the difference between the tax on the final product and the tax on inputs and/or input services, for value added tax on any goods cleared by a manufacturer to neutral with regard to place of removal, increase in input/input service credit should be accompanied by increase in the tax on the final product. 10.1 Therefore the Appellants plea based on the Boards Circular No.137/3/06-CX-4 dt. 02.02.06 is against the very character of the Central Excise duty which is to be collected as a value add ..... 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