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TMI Blog2014 (10) TMI 297X X X X Extracts X X X X X X X X Extracts X X X X ..... not integral part of the price of goods.' THE FACTS 3. The Assessee manufactures cement and clinker and it supplied the goods to different entities on freight on road (FOR) basis during the relevant period. According to the Assessee, it continued to be owner of the goods till delivery and the sale of the goods took place at the destination. 4. The amount paid for the GTA-service was not included in the price of the goods; and it was not integral part of the price of the goods. It was separately paid but the Assessee claimed Cenvat credit on the service tax paid. 5. A show cause notice dated 11.07.2008 was issued to the Assessee, asking it to show cause as to why the Cenvat credit claimed on the service tax on the GTA-service be not reversed. 6. The Assessee filed its reply on 04.11.2008. However, the AO, by his order dated 19.02.2009, reversed the Cenvat credit to the extent of Rs. 5,57,224.00, charged interest on the amount, and imposed penalty of Rs. 10,000.00. 7. Aggrieved by the aforesaid order, the Assessee filed an appeal before the Tribunal. It was partly allowed on 04.01.2011. The reversal of the Cenvat credit alongwith interest charged was upheld however, the pe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not integral part of the price of the goods; and (iv)The cenvat credit cannot be claimed. THE DECISION What is Cenvat Credit? 11. The Central Excise Rules, 1944 (the Excise Rules) were framed under the Central Excise Act, 1944 (the Act). A scheme was introduced on 01.03.1986 under Rule 57A to 57J by which the modvat credit for the excise duty already paid on the input could be availed. 12. The Supreme Court in Ichalkaranji Machine Centre Pvt. Ltd. v. Collector of Central Excise, Pune {2004 (174) ELT 417 (SC) has explained the principle behind Modvat credit by observing, 'Modvat is basically a duty collecting procedure, which aims at allowing relief to a manufacture on the duty element borne by him in respect of the inputs used by him. It... entitled a manufacturer to take instant credit of the central excise duty paid on the inputs used by him in the manufacture of the finished product, provided that the input and the finished product were excisable commodities and fell under any of the specified chapters in the tariff schedule. 13. Section 3 of the Act is the charging section. It is titled as 'Duties specified ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e. cenvat credit may be taken only of those inputs, whose price was added in the price of the goods or was included towards the price of the goods and not otherwise. It is also clear from the Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000 (the Valuation Rules). 22. Rule 5 of the Valuation Rules (see Appendix-IV) provides that the value of the excisable goods shall be deemed to be transaction value excluding the cost of transportation from the place of removal upto the place of delivery of such excisable goods but, explanation-2 to Rule 5 of the Valuation Rules provides that in case of the cost of the transportation from the factory to the place of removal, where the factory is not the place of removal, shall not be excluded for the purposes of determining the value of the excisable goods. 23. In the present case, the Assessee has not treated the GTA-services of transporting goods to the destination as a part of the input service. In case it had so treated then it should have added this value in the price of the goods or in the valuation for calculating duty. 24. The Assessee has not included the amount paid for the GTA-service in the price of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n service tax paid for the Goods Transportation Agency service provided amount paid was integral part of the price of the" goods; (b) In this case, the amount paid for the GTA service was not integral part of the price of the goods; and (c) The Assessee was not entitled to claim cenvat credit of the service tax paid; (d) The question is answered in favour of the Department and against the Assessee. The tax case has no merit. It is dismissed. Sd/- Yatindra Singh Chief Justice Sd/- Prashant Kumar Mishra Judge Appendix-I The relevant part of rule 2(l) of the Cenvat Credit Rules, 2004, applicable for the relevant period is as follows: (xi) Cenvat Credit Rules, 2004 RULE 2. Definitions-In these rules, unless the context otherwise requires, ... (l) "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 o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he goods are sold by the assessee, for delivery at the time and place of the removal, the assessee and the buyer of goods are not related and the price is the sole consideration for the sale, be the transaction value; ... (3) For the purposes of this section, - (c) "place of removal " means - [(iii) a depot, premises of a consignment agent or any other place or premises from where the excisable goods are to be sold after their clearance from, factory;]" from where such goods are removed; ... Appendix-IV The relevant part of rule 5 of the Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000 is as follows: RULE 5. Where any excisable goods are sold in the circumstances specified in clause (a) of sub-section (1) of section 4 of the Act except the circumstances in which the excisable goods are sold for delivery at a place other than the place of removal, then the value of such excisable goods shall be deemed to be the transaction value, excluding the cost of transportation from the place of removal upto the place of delivery of such exci ..... X X X X Extracts X X X X X X X X Extracts X X X X
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