M/S.Orient Paper Mills vs Cce, Bhopal

[Arising out of Order-in-Appeal No.BPL-EXCUS-000-APP-272 & 273 -13-14 dated 03.03.2014 passed by the Commissioner (Appeals), Customs & Central Excise, Bhopal]

For approval and signature:

HONBLE MR. S.K. MOHANTY, MEMBER (JUDICIAL)

1. Whether Press reporters may be allowed to see the

order for publication as per Rule 27 of the CESTAT

(Procedure) Rules, 1982?

2. Whether it should be released under Rule 27 of the

CESTAT (Procedure) Rules, 1982 for publication in

any authoritative report or not?

3. Whether Their Lordships wish to see the fair copy

of the Order?

4. Whether Order is to be circulated to the Departmental

authorities?

_________________________________________________

M/s.Orient Paper Mills Appellant

Vs.

CCE, Bhopal  Respondent

Present for the Appellant :Shri O.S. Bhatnagar, Advocate

Present for the Respondent: Shri G.R. Singh, D.R.

Coram: HONBLE MR. S.K. MOHANTY, MEMBER (JUDICIAL)

Date of Hearing/Decision: 08.06.2015

FINAL ORDER NO. 53306-53307/2015

PER: S.K. MOHANTY

These appeals are directed against the impugned order dated 03.03.2014 passed by the Commissioner (Appeals), Central Excise, Bhopal, wherein cenvat credit of service tax paid on outward transportation denied in the adjudication order dated 31.08.2012 was upheld.

2. The facts of the case are that the appellant is a manufacturer of hazardous chemical namely, Caustic Soda Lye, Caustic Soda Flake, Liquid Chlorine, Hydrochloric Acid and Bleach Liquor. The appellant avails Cenvat credit of Central Excise duty and service tax paid on the inputs and input services respectively, used in, or in relation to manufacture of final products. During the disputed period, the appellant had availed cenvat credit of service tax paid on outward freight (transportation charges), which was denied in the adjudication order on the ground that incurrence of freight charges are in relation to movement of goods from beyond the place of removal i.e. the factory gate, and as such, taking of Cenvat credit is outside the scope and purview of the Cenvat statute. The said views taken by the adjudicating authority was upheld by the ld. Commissioner (Appeals) in the impugned order. Hence, the present appeal before this Tribunal.

3. Shri O.S. Batnagar, the ld. Advocate appearing for the appellant submits that the excisable goods manufactured by the appellant are dispatched by road on FOR destination basis after the same are filled in FRP/ Rubber lined tankers, for direct delivery from the appellants factory to the storage tank installed in the buyers premises, without involvement of any transhipment or unloading during transit. According to him, since the ownership or the title of goods remains with the appellant and the same was transferred to the ultimate buyer on delivery of the goods at its site, such delivery point shall be considered as the place of removal in terms of section 4 (3) (c) of the Central Excise Act, 1944, and the service tax paid on freight charges should be eligible as cenvat credit. To justify his above stand, the ld. Advocate relies on the judgement of Honble Chattisgarh High Court in the case of Ultratech Cement Ltd. Vs. Commissioner of Central Excise, Raipur, reported in 2014 (35) STR 641 (Chattisgarh) and also the CBEC Circular No.988/12/2014-CX dated 20.10.2014 issued by the CBEC.

4. Per contra, the ld. DR Shri G.R. Singh, appearing for the Revenue  respondent while reiterating the findings recorded in the impugned order, places reliance on the judgment of Chattisgarh High Court in the case of Lafarge India Ltd. -vs.- CCE, Raipur, reported in 2014 (307) ELT 7 (Chattisgarh) to substantiate that the amount paid by the appellant for the GTA service was not integral part of the price of the goods, and as such, service tax paid on such GTA service shall not be available to the appellant as Cenvat credit.

5. I have heard the ld. Counsel for both the sides and perused the records.

6. The purchase orders issued by the buyer is relevant for consideration of the issue as to whether service tax paid on GTA service will be eligible to the benefit of cenvat credit. In this context, the relevant terms and conditions in the purchase contract entered into between the buyers M/s.Indian Farmers Fertiliser Cooperative Ltd. (IFFCO) and the appellant are extracted herein below:-

5. Transaportation is included in suppliers scope and the awarded order is F.O.R. IFFCO, Phulpur basis no extra charges are payable on transportation on any account. Transportation should be done in FRP/RUBBER lined tankers to our Phulpur unit. The delivery must not be linked with the availability of the tankers.

14. The tanker must confirm to motor vehicle act 1988, hazardous chemical rule 1989. They must contain the personal protection equipment (PPE), transport emergency card (TRM CARD) and emergency information panel (EIP). If the same are not available IFFCO shall have the liberty to send back the tankers without unloading or to arrange the same at the risk and cost of the supplier.

7. The condition in the said purchase order clearly stipulates that the ownership / title of goods remain with the appellant till the same reaches the customers premises. Thus, as per the provisions of section 4 (3) (c) of the Central Excise Act, 1944, the place or removal in this case shall be the buyers factory, where the goods are ultimately delivered by the appellant. Reading of the inclusive part of definition of input service makes the position clear that if the place of removal is premises of consumer, then the assessee shall be entitled to cenvat credit of service tax paid on the freight element for movement of goods from the factory to such destination point.

8. The present case of the appellant is squarely covered by the judgement of Honble Chattisgarh High Court in the case of Ultra Tech Cement (supra), wherein it has been held that if under the terms of the contract, the sale takes place at the destination, then that place will be considered as the place of removal and service tax paid on GTA service for transporting the goods, up to the destination, will be available for Cenvat credit. Further, placing reliance on the decision of this Tribunal in the case of Associated Strips Ltd. Vs.- CCE, New Delhi [2002 (143) ELT 131 (Tri.-Del.)] and the Judgment of Honble Supreme Court in the case of Escorts JCB Ltd. Vs.-CCE, New Delhi [2002 (146) ELT 31 (S.C.)], the CBEC vide Circular dated 20.10.2014 has clarified that the place where sale has taken place or when the property in goods passes from the seller to the buyer is the relevant consideration to determine the place of removal.

9. The judgement of Chattisgarh High Court in the case of Lafarge India Ltd. (supra) cited by the ld. DR also squarely applies to the facts of the present case in favour of the appellant. In the said judgement it has been clarified that in case of sale at the place of destination, and assessee is only entitled to claim cenvat credit on service tax paid for the Goods Transport Agency service, provided the amount paid was integral part of the price of the goods. In the present case, since the freight amount inclusive of service tax has been charged in the bill and the billed amount was paid by the buyer to the appellant, in my considered opinion, the service tax component on which the appellant took Cenvat credit is forming an integral part of the price of goods.

10. In view of the foregoing, I do not find any merits in the impugned order, and accordingly, the same is set aside and the appeal is allowed in favour of the appellant.

(Dictated and pronounced in the open Court)

(S.K. MOHANTY)

MEMBER (JUDICIAL)

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