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2017 (6) TMI 803 - CESTAT AHMEDABAD

2017 (6) TMI 803 - CESTAT AHMEDABAD - TMI - Interpretation of statute - meaning and scope of the expression “place of removal” employed in the definition of “input service” under Rule 2(l)of CCR,2004 - CENVAT credit - input services - GTA service (outward freight) - place of removal - manufactured goods are cleared and delivered at the place of buyer - Held that: - taking note of Rule 5 of Valuation Rules, 2000 it is observed that the ‘place of removal’ and the ‘place of delivery’ are distinct p .....

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d the Rules made thereunder, but it has to be read in the context in which it has been used. - Even though the meaning of place of removal has to be considered to be factory gate, however, the Courts while interpreting the meaning of ‘input service’ laid emphasis on the condition of sale so as to ascertain whether the services rendered by the assessee was in relation to delivery of the manufactured/finished goods at the place of the buyer. - In most of these appeals, no specific finding .....

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ER (JUDICIAL) E/10221/2014, E/10222/2014, E/11240/2014, E/12046/2014, E/12047/2014, E/12271/2014, E/12272/2014, E/12958/2014, E/12959/2014, E/12960/2014, E/12992/2014, E/13214/2014, E/13395/2014, E/13430/2014, E/13443/2014, E/13444/2014, E/13450/2014, E/13454/2014, E/13517/2014, E/13527/2014, E/13553/2014, E/13590/2014, E/13612/2014, E/13613/2014, E/13614/2014, E/13615/2014, E/13622/2014, E/13623/2014, E/13628/2014, E/13630/2014, E/13679/2014, E/13691/2014, E/13716/2014, E/13717/2014, E/13718/20 .....

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n issue, are taken up together for disposal. 2. To understand the issue, it would suffice to narrate the facts of the Appeal No.E/11954/2013 filed M/s Shubhalaxmi Polyesters Ltd. The Appellants are engaged in the manufacturer of excisable goods had availed CENVAT Credit of ₹ 1,11,828/- of the Service Tax paid on out ward freight (GTA service), during the period November 2008 to October 2009. Alleging that credit availed on the GTA service (out ward freight) is not admissible, demand notice .....

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of CENVAT Credit on GTA services prior to 01.04.2008 has been settled by the jurisdictional High Court in the case of CCE Vs Parth Poly Woven Pvt. Ltd - 2012 (25) STR 4 (Guj.). It is his contention that notwithstanding any contrary judgments, the principle laid down by the jurisdictional High Court is binding on this Tribunal. 3.1 For the period after 01.04.2008, the learned Advocate submitted that the credit availed on GTA services has been allowed on the basis of ascertaining the actual place .....

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on'ble Supreme Court laid down the principle in the context of determination of assessable value, under Section 4 of Central Excise Act, 1944, but, in applying the said principle, to consider the eligibility of CENVAT credit on GTA Service(out ward freight) it has been argued that the meaning and scope of place of removal can never be the place of the buyer, even when the manufacturer, under an agreement, delivers the goods by including the freight element in the price of the goods or recove .....

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ining the observation of the Hon ble Supreme Court in Ispat Industries case, the learned Advocate submitted that the Hon'ble Supreme Court while laying down the principle, took note of the admitted facts of the case, that the sale price of the goods is ex-factory and it was not a condition of sale to deliver the goods at the premises of the buyer. Secondly, the interpretation of the expression place of removal laid down by the Hon'ble Supreme Court was in the context of ascertaining the .....

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ligibility of credit of GTA Service (outward freight) for the period prior to 01.04.2008, it has been laid down that the intention of the respective parties to the transaction should be ascertained so as to determine the actual place of removal i.e. at the factory gate or at the customer s premises. Therefore, the place of removal as understood in the context of extending the CENVAT Credit on outward freight, be given a liberal interpretation. 3.5 It is his further contention that the CBEC in it .....

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m the circulars issued by CBEC after the said amendment on 20.10.2014 and thereafter on 28.02.2015. It is his contention that these circulars issued by the Board in explaining the expression place of removal for its application by the public at large cannot be ignored and should be given due importance in implementing the CENVAT provisions by the Department. These circulars are binding on the Revenue and in support, he has referred to the decision of Hon'ble Gujarat High Court in the case of .....

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;ble Supreme Court, in the case of Ispat Industries Ltd, laid down the meaning of place of removal only to be the factory gate, but it cannot deprive the Appellant the benefit of CENVAT Credit on outward freight services, when the delivery of goods as per agreement, to be at the premises of the customer. In support, the learned Advocate referred to the decision of Hon'ble Mumbai High Court in the case of CCE Pune-III Vs Ajinkya Enterprises - 2013 (294) ELT 203 (Bom.) and Hon'ble Gujarat .....

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ral Excise Act, 1944 all along has been adopted by various High Courts while examining the eligibility of CENVAT Credit on outward freight, whether an input service or otherwise, as defined under Rule 2(l) of CENVAT Credit Rules 2004 till 01.04.2008. In support, he has referred to the judgment of Hon'ble Gujarat High Court in the case of Parth Poly Woven Pvt. Limited. - 2012 (25) STR 4 (Guj.), Hon'ble Chhatisgarh High Court in the case of Lafarge India Ltd Vs CCE Raipur - 2014 (35) STR 6 .....

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d Representative for the Revenue further submitted that the Hon'ble Supreme Court in Ispat industries case, unambiguously laid down at Para 24 of the said judgment that in any circumstances, buyer s premises cannot be the place of removal and therefore, invariably it is to be the factory premises or the warehouse or other places as mentioned therein, as the case may be. The said interpretation is strictly applicable even to the CENVAT Credit Rules 2004, while considering the eligibility of C .....

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41 (SC). 8. Further, he has submitted that the circulars issued by the Board may be binding on the Department, but in arriving at the correct interpretation of the expression place of removal in the light of the principle laid down by Hon'ble Supreme Court ought to be followed. In support, he has referred to the decision of Hon'ble Supreme Court on the binding nature of the circular viz. CCE Bolpur Vs Ratan Melting & Wire Inds - 2008 (231) STR 22 (SC). The learned Authorized Represen .....

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definition of input service under Rule 2(l)of CCR,2004, in the context of admissibility of CENVAT Credit on outward freight (GTA service), when the manufactured goods are cleared and delivered at the place of buyer. 10. The expression place of removal has not been defined under the CENVAT Credit Rules,2004. By virtue of Rule 2(t) of the said Rules, its meaning has been borrowed from its definition contained under Rule 4(4)(c) of Central Excise Act,1944 till a new Rule (qa) is added on the same l .....

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e said judgment, invariably in all cases being at the factory gate or depot, where the goods are stored after removal from the factory or the places mentioned under the definition of place of removal prescribed in Rule 4(4)(c) of Central Excise Act, 1944, therefore, the buyers premises cannot be considered as the place of removal , accordingly, the outward freight charges(GTA Service) cannot fall within the definition of input service , and credit of the service tax paid on the same is not admis .....

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necessary to refer to the definition of input service and place of removal as was in force for the period after 01.04.2008. (l) input service means any service, - (i) used by a provider of [output service] for providing an output service; or (ii) used by a manufacturer, whether directly or indirectly, in or in relation to the manufacture of final products and clearance of final products upto the place of removal, and includes services used in relation to modernisation, renovation or repairs of .....

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(c) place of removal means - a factory or any other place or premises of production or (i) manufacture of the excisable goods; a warehouse or any other place or premises wherein the (ii) excisable goods have been permitted to be deposited without [payment of duty;] a depot, premises of a consignment agent or any other [(iii) place or premises from where the excisable goods are to be sold after their clearance from the factory;] from where such goods are removed; 13. To understand the meaning of .....

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in addition to the price of goods and shown separately in the invoices for such goods. Interestingly, despite the substituted Section 4 not providing for a depot or other premises as a place of removal, Rule 7 deals with the normal transaction value of goods transferred to a depot or other premises which is said to be at or about the same time or the time nearest to the time of removal of goods under assessment. 22. To complete the picture, by an Amendment Act with effect from 14-5-2003, Sectio .....

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ed 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 excisable goods. Explanation 1. - Cost of transportation includes - (i) the actual cost of transportation; and (ii) in case where freight .....

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n reinstated. Rule 5 as substituted in 2003 also confirms the position that the cost of transportation from the place of removal to the place of delivery is to be excluded, save and except in a case where the factory is not the place of removal. 24. It will thus be seen that, in law, it is clear that for the period from 28-9-1996 up to 1-7-2000, the place of removal has reference only to places from which goods are to be sold by the manufacturer, and has no reference to the place of delivery whi .....

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n the Section), alone being places of removal. Under no circumstances can the buyer s premises, therefore, be the place of removal for the purpose of Section 4 on the facts of the present case. (emphasis supplied) 14. A plain reading of the aforesaid ratio of the Hon ble Apex Court makes it amply clear that in the context of determination of assessable value of goods, where freight charge is incurred in delivery of the goods by the manufacturer, place of removal invariably has to be the place fr .....

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and the Rules made thereunder, but it has to be read in the context in which it has been used. This principle has been laid down by the Hon ble Supreme Court in a catena of cases. In the case of V.F. & G Insurance Co. Vs. M/s Fraser & Ross AIR 1960 SC 971 their Lordships observed as: It is well settled that all statutory definitions or abbreviations must be read subject to the qualification variously expressed in the definition clauses which created them and it may be that even where the .....

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ra 15 their Lordships observed: Repugnancy of a definition arises only when the definition does not agree with the subject or context; any action not in conformity with the definition will not obviously make it repugnant to subject or context of the provision containing the term defined under which such action is purported to have been taken. 16. The CENVAT Credit Rules extends credit of the duty/tax paid on various services incurred in or in relation to manufacture of goods, enumerated under th .....

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to be factory gate, however, the Courts while interpreting the meaning of input service laid emphasis on the condition of sale so as to ascertain whether the services rendered by the assessee was in relation to delivery of the manufactured/finished goods at the place of the buyer. 17. The argument of the learned Advocates is that the view taken by the CEBC all along is consistent based on the interpretation of the Tribunal on the meaning of place of removal in the context of input service as de .....

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year 2014 by Notification No.21/2014 CE(NT) dt.11.07.2014, two circulars have been issued by the Board reiterating the same position that the place of removal be considered as the buyers premises if such is the condition of sale and accordingly the Service Tax paid on outward freight (GTA service) shall be eligible as CENVAT Credit. On the face of such argument, it is relevant to reproduce the said Circular. Circular No.988/12/2014-CX, dated 20-10-2014 F.No.267/49/2013-CX. 8 Government of India .....

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Cenvat credit is available upto the place of removal, this definition of place of removal would apply, irrespective of the nature of assessment of duty. (2) The second associated issue is regarding ascertainment of place of removal. In this regard there are two circulars of the Board namely 37B order no 59/1/2003, dated 3-3-2003 [2003 (153) E.L.T. T7] and Circular No.97/8/2007, dated 23-8-2007 [2007 (7) S.T.R. C88]. The relevant paragraphs of these two circulars are reproduced below for ease of .....

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manufacturer/consignor, the eligibility to avail credit of the service tax paid on the transportation during removal of excisable goods would depend upon the place of removal as per the definition. In case of a factory gate sale, sale from a non-duty paid warehouse, or from a duty paid depot (from where the excisable goods are sold, after their clearance from the factory), the determination of the place of removal does not pose much problem. However, there may be situations where the manufactur .....

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the credit of the service tax paid on the transportation up to such place of sale would be admissible if it can be established by the claimant of such credit that the sale and the transfer of property in goods (in terms of the definition as under Section 2 of the Central Excise Act, 1944 as also in terms of the provisions under the Sale of Goods Act, 1930 occurred at the said place. (3) The operative part of the instruction in both the circulars give similar direction and are underlined. They co .....

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rts JCB Limited v. CCE, New Delhi [2002 (146) E.L.T. 31 (S.C.)]. (4) Instances have come to notice of the Board, where on the basis of the claims of the manufacturer regarding freight charges or who bore the risk of insurance, the place of removal was decided without ascertaining the place where transfer of property in goods has taken place. This is a deviation from the Board s circular and is also contrary to the legal position on the subject. (5) It may be noted that there are very well laid r .....

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pellant or is it at the place of the buyer as alleged by the Revenue? In this connection it is necessary to refer to certain provisions of the Sale of Goods Act, 1930. Section 19 of the Sale of Goods Act provides that where there is a contract for the sale of specific or ascertained goods the property in them is transferred to the buyer at such time as the parties to the contract intend it to be transferred. Intention of the parties are to be ascertained with reference to the terms of the contra .....

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either by the seller with the assent of the buyer or by the buyer with the assent of the seller, the property in the goods thereupon passes to the buyer. Such assent may be expressed or implied and may be given either before or after the appropriation is made. Sub-section (2) of Section 23 further provides that where, in pursuance of the contract, the seller delivers the goods to the buyer or to a carrier or other bailee (whether named by the buyer or not) for the purposes of transmission to the .....

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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. (7) Difficulty in implementing the circular may be brought to the notice of the Board. Trade may be kept suitably informed. Hindi version will follow. 17. The learned Authorized Representative for the Revenue in his submission even though did not contradict the meaning of place removal explained in the said circular, however submitted that the circul .....

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ustries case, explaining the definition of place of removal in the context of Section 4 of Central Excise Act, 1944, the Board has not issued any further circular, restricting the meaning of place of removal in the light of the observations of the Hon'ble Supreme Court. Therefore, the CENVAT Credit of Service Tax paid on outward freight (GTA service) is admissible when the condition of sale of goods puts burden on the manufacturer to deliver the goods at the buyers premises. This Tribunal ha .....

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