M/S Shree Cement Limited vs Cce, Jaipur

[Arising out of the Order-in-Original No. 01/CE/JPR-II/COMM./ 2007 dated 28/02/2007 passed by The Commissioner, Central Excise, Jaipur.]

For Approval and signature :

Honble Shri Rakesh Kumar, Member (Technical)

Honble Shri Ashok Jindal, 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 would 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 :

Department Authorities?

M/s Shree Cement Limited Appellant

Versus

CCE, Jaipur Respondent

Appearance

Ms. Surabhi Sinha, Advocate  for the Appellant.

Shri Ranjan Khanna, Authorized Representative (DR)  for the Respondent.

CORAM : Honble Shri Rakesh Kumar, Member (Technical)

Honble Shri Ashok Jindal, Member (Judicial)

Final Order No. 50528/2015 Dated : 20/02/2015

Per. Rakesh Kumar :-

The appellant are manufacturers of cement chargeable to Central Excise duty. The period of dispute in this case is January 2005 to December 2005. During this period, they were availing Cenvat credit of excise duty paid on inputs and of service tax paid on input services as per the provision of Cenvat Credit Rules, 2004. During this period, they were selling cement to various customers on FOR destination basis. This fact is clear from para 3 of the show cause notice, which is reproduced below :-

3. Statement of Shri Arvind Khicha, was recorded under Section 14 of the Central Excise Act, 1944 on 09/02/06 wherein he inter-alia stated as under :-

i) for payment of duty on clearing of Cement, they were also taking and utilising credit of Cenvat/Service Tax paid on inputs/capital goods and input service in terms of the Cenvat Credit Rules, 2004. They are also registered under Serviced Tax Rules, 1994 for payment of Service tax on service received from goods transport agency i.e. freight paid to goods transport agency w.e.f. 01/1/2005. They were taking credit of service tax paid on outward freight for the transportation of cement transported to their various depots as well as on cement cleared to parties to whom cement was sold on FOR basis i.e. freight was borne by them. They were not taking credit of service tax paid on freight for transportation of cements sold to parties on Ex-works, other than the parties to whom cement was sold on FOR basis.

(ii) On being asked to explain as to why they have taken credit of service tax paid on freight for transportation of cement sold to parties on FOR basis, whereas, Cenvat Credit Rules permit admissibility of credit on outward transportation upto the place of removal i.e. factory gate or depot, as the case may be, Shri Khicha stated that the Cenvat Credit Rules, 2004 also permit the admissibility of Cenvat Credit of Service Tax on input services and in terms of Rule 2 (i) (ii), input service means any service used by 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. In addition to this Shri Khicha stated that the definition of place of removal: as given in Section 4 of the Central Excise Act, 1944, also defines the place of removal as any other place or premises from where the excisable goods are to be sold after clearance from the factory. Since in the case of FOR sale, the sale takes place only when the good are delivered and accepted by the buyer, the place of buyer is the place of goods sold and the same is also to be treated as the place of removal. They have taken and utilised Cenvat Credit of Rs. 80,69,779/- (Service Tax Rs. 79,08,596/- and Education Cess Rs. 1,61,183/-) of Service tax paid on the freight for transportation of cement to various parties on FOR basis and that the party-wise details in respect of credit taken of service tax paid on freight for transportation to various buyers on FOR basis would be submitted shortly.

2. The point of dispute is as to whether the appellant would be eligible for Cenvat credit of the service tax paid on the GTA service availed for transportation of the finished goods from the factory gate to the customers premises. The Department being of the view that this Cenvat credit would not be admissible, issued show cause notice dated 01/03/06 for denial of Cenvat credit amounting to Rs. 80,69,779/- and its recovery alongwith interest and also for imposition of penalty. The show cause notice was adjudicated by the Commissioner vide order-in-original dated 22/11/06 by which the above-mentioned Cenvat credit demand was confirmed alongwith interest and penalty of Rs. 2,00,000/- was imposed on them under Rule 15 (1) of Cenvat Credit Rules. Against this order of the Commissioner, this appeal has been filed.

3. Heard both the sides.

4. Ms. Surabhi Sinha, Advocate, the learned Counsel for the appellant, pleaded that the para 3 of the show cause notice itself accepts that the sales of the appellant during the period of dispute were on FOR destination basis, that in view of this position, in terms of Board Circular No. 97/8/2007-ST dated 23/8/07, the Cenvat credit of service tax paid on the GTA service availed for transportation of the finished goods up to the customers premises has to be allowed, that based on this Circular of the Board Honble Punjab & Haryana High Court in the case of Ambuja Cement Ltd. vs. Union of India reported in 2009 (236) E.L.T. 431 (P&H) has held that the Cenvat credit of service tax paid on GTA service availed for transportation of finished goods up to the customers premises is admissible, when the sales on FOR destination basis, that same view has been taken by Honble Karnataka High Court in the case of CCE & ST, LTU, Bangalore vs. ABB Limited reported in 2011 (23) S.T.R. 97 (Kar.) and that in view of the above submissions, the impugned order is not sustainable.

5. Shri Ranjan Khanna, the learned DR, defended the impugned order by reiterating the findings of the Commissioner.

6. We have considered the submission from both the sides and perused the records.

7. It is seen that para 3 of the show cause notice itself accepts that the sales of the finished goods made by the appellant during the period of dispute were made on FOR destination basis. If this is so, it is the customers premises which would have to be treated as place of removal and hence the Cenvat credit in respect of GTA services availed for transportation up to the customers premises would be admissible, as the definition of input services during the period of dispute, as given in Rule 2 (l) of the Cenvat Credit Rules, 2004 covered outward transportation of the finished goods up to the place of removal and when the sales are on FOR destination basis, it is the customers premises which has to be treated as the place of removal. We find that the issue stands decided in favour of the appellant by Honble Punjab & Haryana High Court in the case of Ambuja Cement Ltd. (supra). In view of this, the impugned order is not sustainable. The same is set aside. The appeal is allowed.

(Dictated and pronounced in open court.)

(Rakesh Kumar)

Member (Technical)

(Ashok Jindal)

Member (Judicial)

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