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TMI Blog2024 (7) TMI 469X X X X Extracts X X X X X X X X Extracts X X X X ..... le of Goods Act, 1930 by applying the same to the facts of each case to determine as to when the ownership in the goods is transferred from the seller to the buyer. Plain reading of the above legal provisions under Section 4 of the Central Excise Act, 1944 state that for the purpose of valuation of excisable goods, for determining the levy of central excise duty if chargeable on ad valorem basis, it shall be the transaction value. Where the goods are sold by the assessee, for delivery at the time and place of removal, and where the assessee and the buyer of the goods are not related and the price is the sole consideration for the sale, then the same shall be the transaction value. Thus, it is clear that the value shall be determined with reference to goods delivered at the time and at the place of removal. The Purchase Order placed by the customer-BAL with the appellant specifically provide for delivery as follows:- Delivery Term: FREE DELIVERY AT OUR WORKS . Further, the payment terms for the sale of goods is 45 days from the date of goods being received at the customer s factory works. Thus, it is found that the sale of goods in the present case takes place when the goods are del ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ged to the customer-BAL and the same is not shown separately in the invoices raised by the appellants in sale of finished goods. The appellant has availed Cenvat credit in respect of service tax paid, under reverse charge mechanism on GTA service for transportation of goods from its factory/depot to the premises of the customer-BAL. The Department had interpreted that the aforesaid Cenvat credit on GTA services has been availed for transportation of finished goods beyond the place of removal and thus did not qualify as input service within the meaning of Rule 2 (l) of Cenvat Credit Rules, 2004 (CCR) inasmuch as the place of removal for clearances of finished goods can only be factory gate and not the customer s premises. Accordingly show cause proceedings were initiated for recovery of Cenvat credit wrongly utilized by the appellant in terms of Section 11A(1) of the Central Excise Act, 1944 read with Rule 14 of Cenvat Credit Rules, 2004. The show cause notice initially issued for the recovery of Cenvat credit of service tax availed during April, 2010 to December, 2014 was adjudicated by the original authority in confirmation of the proposed demands, which on preferring an appeal by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appellant being the seller alone remained as the owner of the goods retaining the right of disposal. Hence, learned Advocate pleaded that the place of removal would be the buyer s/customer s premises in their case. 3.3 Learned Advocate also stated that it is fact accepted by the Commissioner (Appeals) in the impugned Order that the appellant sold their finished goods to the customer-BAL on FOR basis. Therefore, he stated that their case is covered by paragraph 4 of the CBEC circular dated 08.06.2018 and hence GTA service available for transportation of goods from factory gate to the customer s premises would be considered as output transportation up to the place of removal. Hence, he submitted that the credit on GTA service is admissible and has been rightly taken as Cenvat credit by the appellant. 3.4 Learned Advocate also stated that the issue of allowing Cenvat credit in respect of GTA services is no more res integra, in view of the decisions of the Hon ble Supreme Court in the case of CCE Vs. Roofit Industries Ltd. 2015 (319) E.L.T. 221 (S.C.) and CCE ST Vs. Ultra Tech Cement Ltd. 2018 (2) TMI 117 (S.C.) and various other case laws cited below, which are relied upon by them in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the case and the decision of the Hon ble Supreme Court in the judgements delivered in the case of Emco and Roofit industries. Further, the ratio decidendi of the following judgements of the Hon ble Supreme Court in the case of Escorts JCB Ltd. Vs. Commissioner of Central Excise, Delhi-II [2002 (146) E.L.T. 31 (S.C.)] and Commissioner of Customs Central Excise, Nagpur Vs. Ispat Industries Ltd. [2015 (324) E.L.T. 670 (S.C.)] also apply to the present case. As it has been held that the customer s premises can never be considered as place of removal , he claimed that the Cenvat credit has been rightly disallowed by the Department. 4.2 He further stated that in the case of Ultra Tech Cement Ltd. (supra) it has been held GTA service used for the purpose of outward transportation of goods is not covered within the ambit of Rule 2(l) of CCR, 2004. In the case of Ultra Tech Cement Ltd. the party was manufacturer of cement, and they were clearing the finished goods from the factory gate direct to customers and their place on FOR basis and the transportation cost has been included in the assessable value of the finished goods. Further, in the case of Roofit industries (supra) the facts are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e period from January 2015 to June 2017. Recently, the Hon ble Supreme Court in the case of CCE ST Vs. Ultra Tech Cement Ltd. 2018 (9) G.S.T.L. 337 (S.C.) has held that no Cenvat credit will be allowed to the manufacturer in respect of GTA services availed on outward transportation of goods from the place of removal to buyer s premises post April 1, 2008 (Changes brought in definition of input service vide Notification No. 10/2008-CE (NT) dated March 1, 2008) I observe that the definition of input service under Rule 2(l) of the CENVAT Credit Rules, 2004 was amended on 01.03.2008 by replacing the words outward transportation from the place of removal with the words outward transportation upto place of removal and by virtue of said amendment, input service has been restricted upto the place of removal and the Board s Circular No. 97/8/2007, dated 23.08.2007 which was used in context of earlier definition, cannot be applied in view of change in the legal position. Further the appellant say that they have cleared the goods on FOR basis, does not necessarily lead to admissibility of Cenvat credit on all the services which are received till a place located outside the place of removal . ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at CENVAT credit on Goods Transport Agency availed for transport of goods from place of removal to buyers premises was not admissible, but the principles in ascertaining the place of removal in the context of admissibility of CENVAT credit on GTA Services have not been laid down, as was also submitted by the learned counsel for the appellant. The said issue has been left open to be decided on the facts of each case. 28. The said judgment of the Supreme Court in Ultratech Cements has been subsequently considered by different High Courts. The Rajasthan High Court in Commissioner of CGST, Udaipur vs. Mangalam Cements Ltd. [2019 (24) G.S.T.L. 545 (Raj.)] and Commissioner of CGST Central Excise, Jaipur vs. ARL Infratech Ltd. [2019 (369) E.L.T. 351 (Raj.)], in judgments delivered on the same date i.e., on 19.09.2018, following the judgment in Ultratech Cements held that credit would not be admissible on GTA service for delivery of goods at the buyers premises. In the both these cases, the Circular issued by the Board was not considered. 29. The judgment of the High Court of Rajasthan in Mangalam Cements was carried in appeal before the Supreme Court. The Supreme Court set aside the order ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . C.C., C.E. S.T-Commissioner of Central Tax [CEA 56/2019], has recorded in paragraph No. 5 that as per the purchase orders, appellant was required to supply the goods at the buyer s premises and the price of goods would include outward freight . Similarly, in the case of MAPAL India Pvt. Ltd. [CEA 71/2019], the CESTAT has recorded a similar finding. ***** 16. This Court in the case of Madras Cements Ltd., has held as follows: 32. The interpretation of the judgment of the Supreme Court by the High Courts as above throws light on the controversy. The Rajasthan High Court in Mangalam Cements simply referred to the judgment of the Supreme Court without analyzing its applicability in the context of the case in denying the credit on GTA service. The Supreme Court set aside the said judgment and remanded the case to examine the facts in the light of the judgment. On the other hand, in the judgment of the Karnataka High Court in Bharat Fritz Werner, all aspects of the case have been considered, including the Circular dated 08.06.2018 of the Board, and the judgments of Supreme Court in Emco Ltd. and Roofit Industries to conclude that the place of removal is the buyer s premises. 33. No evi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eller to the buyer. The charges which are to be added have put up to the stage of the transfer of that ownership inasmuch as once the ownership in goods stands transferred to the buyer, any expenditure incurred thereafter has to be on buyer s account and cannot be a component which would be included while ascertaining the valuation of the goods manufactured by the buyer. That is the plain meaning which has to be assigned to Section 4 read with Valuation Rules. 13 . In the present case, we find that most of the orders placed with the respondent assessee were by the various Government authorities. One such order, i.e., order dated 24-6-1996 placed by Kerala Water Authority is on record. On going through the terms and conditions of the said order, it becomes clear that the goods were to be delivered at the place of the buyer and it is only at that place where the acceptance of supplies was to be effected. Price of the goods was inclusive of cost of material, Central Excise duty, loading, transportation, transit risk and unloading charges, etc. Even transit damage/breakage on the assessee account which would clearly imply that till the goods reach the destination, ownership in the good ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of short excise duty paid for the period 28-9-1996 to 31-12-2000. In this show cause notice, it was, inter alia, alleged that the transit insurance policies reveal that the assessee had been keeping the custody of the goods with it during the transit. Further, the agreement with various customers nowhere suggested that the transporter was to take the delivery of goods on behalf of the customers. The transit insurance from the assessee s works upto the stores sites where the goods were to be delivered at the buyer s premises under the contract, was on assessee s account. On that basis, the show cause notice contended that the transaction value would include the amount charged on account of transportation and transit insurance as it was covered by the definition of transaction value contained in Section 4(3)(d) of the Act. The assessee refuted the aforesaid averments in the show cause notice with the plea that sale of goods to the customers took place at the factory gate of the assessee which was the place of removal of the goods. Merely because the assessee arranged for transportation as well as transit insurance at the request and instance of the customers, there was no reason to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as ex-works at the factory gate of the assessee. The payment was to be made before discharge of the goods from the factory premises. In the opinion of the Court, the machinery which was handed over to the career/transporter on receiving the payment was as good as delivery to the buyer in terms of Section 39 of the Sale of Goods Act and, therefore, possession of the sold goods was handed over to the buyer at the factory gate. In this manner, the transaction was full and complete and nothing remained to be done after the goods left the factory premises. On these facts, provisions of Section 4 of the Act, which deals with valuation of excisable goods for the purposes of charging of duty of excise was taken note of and analysed, holding that the aforesaid charges could not be included for the purpose of arriving at valuation of excisable goods. The Court found fault with the orders passed by the authorities as well as CEGAT in the following manner : A perusal of the orders passed by the authorities and the CEGAT show that since transit insurance was arranged by the assessee, therefore, it was inferred and held that the ownership of the goods was retained by the assessee until it was de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld by the seller merely by reason of the fact that the seller had insured such goods during transit to buyer. It is not necessary that insurance of the goods and the ownership of the property insured must always go together. It may be depending upon various facts and circumstances of a particular transaction and terms and conditions of sale. A reference has also been made to Colinvauz s Law of Insurance, Sixth Edition by Robert Merkin to indicate that there may be insurance to cover the interest of others that is to say not necessarily the person insuring the interest must be the owner of the property. In one of the cases referred to and reported in 1983 (14) E.L.T. 1896 (S.C.) Union of India and Others etc. etc. v. Bombay Tyre International Ltd. etc. etc. the question involved was regarding deduction of transportation charges along with cost of insurance. It was held as follows : Therefore, the expenses incurred on account of the 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. Consequently, where the sale is effected at the factory gate, expenses incurred by the assessee upto the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f each case to determine as to when the ownership in the goods is transferred from the seller to the buyer. The charges which are to be added have put up to the stage of the transfer of that ownership inasmuch as once the ownership in goods stands transferred to the buyer, any expenditure incurred thereafter has to be on buyer s account and cannot be a component which would be included while ascertaining the valuation of the goods manufactured by the buyer. That is the plain meaning which has to be assigned to Section 4 read with Valuation Rules. 15 . Having stated the legal position, we now revert to the facts of the present case. 16 . The Commissioner, Central Excise while deciding that the transportation charges as well as transit insurance charges are to be included for fixing the transaction value. The order reveals that the Commissioner had scanned through the agreements entered into between the assessee and with various customers and other documents on the basis of which the Commissioner concluded that the property in goods was passed on to the customers only at the destination. According to him, there was a specific condition in the contracts that the goods will be dispatch ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n in such a case brief reasons are to be given by the Tribunal, in particular, to meet the arguments which are advanced by the appellant while challenging such an order. However, in the instant case, we find that there is a detailed discussion in the order of the Commissioner on the facts of the case. Those facts are not adverted to or dealt with. The decision of the Commissioner is overruled with single observation that the case is covered by the judgment in Escorts JCB Ltd., without discussing as to how it was so covered. This is notwithstanding the fact that the decision as to which is the place of removal depends upon the facts of each case. 19. The consequence of the aforesaid discussion would be to set aside the order of the Tribunal and remit the case to it for fresh consideration after looking into the facts of the present case, namely, the terms and conditions of the sale with the buyer and determination on that basis as to which was the place of removal, that is whether it was the factory gate of the assessee or the place of delivery. We may record that as per the Commissioner, place of removal was the place of delivery at the buyer s premises. However, since no documents ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d should not be demanded under Section 11A of the Central Excise Act read with Rule 14 of Cenvat Credit Rules; and interest and penalty should not be imposed. Appellant contested the show cause notice and the adjudicating authority passed the Orderin-Original C. No. V/84/15/82/2015/ Adjn.BII, dated 29-2-2016 confirming the demand of Rs. 20,48,961/-, interest of Rs. 20,48,961/- and penalty of Rs. 1,50,000/- . xx xx xx xx xx 13. The CESTAT, in the case of Bharat Fritz Werner Ltd. v. C.C., C.E. S.T-Commissioner of Central Tax [CEA 56/2019], has recorded in paragraph No. 5 that as per the purchase orders, appellant was required to supply the goods at the buyer s premises and the price of goods would include outward freight . Similarly, in the case of MAPAL India Pvt. Ltd. [CEA 71/2019], the CESTAT has recorded a similar finding. 14 . It is clear that as per Section 4(3)(c)(iii) of Central Excise Act, 1944, the definition of Place of Removal means the premises from where the excisable goods are to be sold after their clearance form the Factory. 15 . The Input Service defined in Rule 2(1) of Cenvat Credit Rules, 2004, includes any service in relation to Outward Transportation up to the P ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of removal is the buyer s premises and had allowed the appeal seeking the benefit of Cenvat credit of service tax paid on GTA service as eligible input credit. Extract of Notification No. 10/2008-Central Excise (N.T.) dated 01.03.2008 In exercise of the powers conferred by section 37 of the Central Excise Act, 1944 (1 of 1944) and section 94 of the Finance Act, 1994 (32 of 1994), the Central Government hereby makes the following rules further to amend the CENVAT Credit Rules, 2004, namely :- 1. (1) These rules may be called the CENVAT Credit (Amendment) Rules, 2008. (2) Save as otherwise provided in these rules, they shall come into force on the 1st day of April, 2008 2. In the CENVAT Credit Rules, 2004 (hereinafter referred to as the said rules), in rule 2, (i) in clause (l), for the words clearance of final products from the place of removal , the words clearance of final products, upto the place of removal, shall be substituted; . . And Circular No. 1065/4/2018-CX., dated 8-6-2018 F. No. 116/23/2018-CX-3 Government of India Ministry of Finance (Department of Revenue) Central Board of Indirect Taxes Customs New Delhi Subject : Place of Removal under Section 4 of the Central Excis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... yer of excisable goods. The depot or the premises of the consignment agent of the manufacturer are obviously places which are referable to the manufacturer. Even the expression any other place of premises refers only to a manufacturer s place or premises because such place or premises is to be stated to be where excisable goods are to be sold . These are key words of the sub-section. The place or premises from where excisable goods are to be sold can only be manufacturer s premises or premises referable to the manufacturer. If we were to accept contention of the revenue, then these words will have to be substituted by the words have been sold which would then possibly have reference to buyer s premises. 4. Exceptions : (i) The principle referred to in para 3 above would apply to all situations except where the contract for sale is FOR contract in the circumstances identical to the judgment in the case of CCE, Mumbai-III v. Emco Ltd. - 2015 (322) E.L.T. 394 (S.C.) and CCE v. M/s. Roofit Industries Ltd. 2015 (319) E.L.T. 221 (S.C.). To summarise, in the case of FOR destination sale such as M/s. Emco Ltd. and M/s. Roofit Industries where the ownership, risk in transit, remained with t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er of the goods are not related and the price is the sole consideration for the sale, be the transaction value; (b) in any other case, including the case where the goods are not sold, be the value determined in such manner as may be prescribed. Explanation. For the removal of doubts, it is hereby declared that the price-cumduty of the excisable goods sold by the assessee shall be the price actually paid to him for the goods sold and the money value of the additional consideration, if any, flowing directly or indirectly from the buyer to the assessee in connection with the sale of such goods, and such price-cum-duty, excluding sales tax and other taxes, if any, actually paid, shall be deemed to include the duty payable on such goods. (2) The provisions of this section shall not apply in respect of any excisable goods for which a tariff value has been fixed under sub-section (2) of section 3. (3) For the purposes of this section, (a) assessee means the person who is liable to pay the duty of excise under this Act and includes his agent; (b) persons shall be deemed to be related if (i) they are inter-connected undertakings; (ii) they are relatives; (iii) amongst them the buyer is a re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ufacture of final products and clearance of final products up to the place of removal ; and includes services used in relation to modernisation, 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 upto the place of removal, procurement of inputs, accounting, auditing, financing, recruitment and quality control, coaching and training, computer networking, credit rating, share registry, security, business exhibition, legal services, inward transportation of inputs or capital goods and outward transportation up to the place of removal; but excludes (A)service portion in the execution of a works contract and construction services including service listed under clause (b) of section 66E of the Finance Act (hereinafter referred as specified services) in so far as they are used for (a) construction or execution of works contract of a building or a civil structure or a part thereof; or (b) laying of foundation or making of structures for support of capital goods, except for the provision of one or more of the specified services; or] (B)services provided by wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ctly or indirectly, in or in relation to manufacture of final goods or for providing of output services; and (b) inclusion part of the definition, specifically stating certain services used in relation to various activities which is used in relation to the manufacture, both of which are covered under the scope of input services . However, the third category, (c) exclusion part of the definition, specifically provide for certain services or portion of such services, which are not included in the above definition of input service . In order to examine whether a particular service is covered as inputs service , either it could be covered under category (a) or (b) and should not fall under the exclusion category under (c) above. I find that GTA services has been specifically covered by the words services used for outward transportation up to the place of removal in category (b) inclusion clause as well as under the category (a) means clause, in terms of the words any service used for clearance of final products up to the place of removal . The only issue in dispute is in determining the place of removal in each case after examining the facts of the case and to decide whether they fall ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... place of removal in various context, and the general principle to be adopted, exceptions to the above and the eligibility of Cenvat credit on GTA services. The said circular only brings the various judgments of Hon ble Supreme Court to the notice of the field formations, so that these may be referred for further guidance in individual cases based on facts and circumstances of each of the case. It also comes out clearly from the amendment made vide Notification No. 10/2008-Central Excise (N.T.) dated 01.03.2008, that it had shifted the goal post for qualifying any service under category (a) and specified inclusive part of services in the context of manufacture of final products from from the place of removal , to upto the place of removal . In other words, prior to the amendment, inputs service was to be determined with reference to services provided from the starting point of clearance i.e., place of removal such as factory, warehouse, depot or premises of consignment agent but did not specify to which extent that service is allowable. After amendment, the inputs service is to be determined with reference to end point where sale is effected i.e., service provided upto the place of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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