Sanghi Industries Ltd. Vs CCE (CESTAT Ahmedabad)
CESTAT Ahmedabad allows CENVAT credit on GTA services for doorstep delivery, distinguishing from Ultratech judgment. Relying on Circulars, benefit extended during the relevant period.
CESTAT Ahmedabad has held that Cenvat credit was available on GTA services for delivering goods to buyer’s doorstep, in a case involving both MRP and non-MRP sales. Period involved was after 1-4-2008. The Tribunal observed that goods were cleared on FOR basis and freight/damages in transit was responsibility of assessee. Supreme Court judgement in Ultratech was distinguished noting that it did not consider Point of Sale or FOR price issue. CBIC Circulars dated 22-12-2014 and 23- 8-2007, as in force during relevant time, were relied upon.
Till the goods are handed over to the buyer, the cost is borne by the assessee or in other words where the goods are cleared on FOR basis the freight paid on outward transportation would qualify as “Input Service”
As regard the issue raised by the appellant that the excise duty paid on the element of freight being more than the element of cenvat credit on the outward GTA, therefore, there should not be any demand. We find force in the argument of the appellant however, since we are deciding the issue on merit, the admissibility of the Cenvat Credit on outward GTA on the basis of provision under Cenvat Credit Rules itself, we need not to deal this aspect hence, the issue related to this fact left open. As regard the submission made by Ld. Counsel that they have been operating as per the guideline given in the Circular dated 22.12.2014 and 23.08.2007 which was operative at the relevant time, therefore, even though the same were withdrawn w.e.f. 08.06.2018, but at the relevant time the benefit of said Circular shall be available. We find force in the argument of the Ld. Counsel as the law on this issue has been settled time and again by the Hon’ble Supreme Court as per the judgment cited by the Ld. Counsel and on various other judgments that beneficial Circular cannot be withdrawn retrospectively. Consequently, the benefit of the said Circulars shall be available to the appellant during the material period of this case.
FULL TEXT OF THE CESTAT JUDGEMENT
The present appeals have been filed by M/s Sanghi Industries Ltd. against Order-in-original No. KCH-EXCUS-000-COM-028 to 030-2016- 17 dt. 31.03.2017 passed by the Commissioner, Central Excise & Service Tax, Audit – I, Ahmedabad and Order-in-Original No. RAJEXCUS-OOO-COM-27 to 40-14-15 dt. 13.11.2014 passed by the Commissioner, Rajkot.
1.1 The brief facts leading to the dispute that the appellant are engaged in manufacture of cement which is sold on MRP Basis as well as non MRP basis. They are making MRP based sale to Dealers/ Stockist etc., in case of which MRP is mentioned on bags and Non MRP sale is made to users e.g. Industrial consumers and institutional customers in case of which no MRP is mentioned on bags. The cement is directly dispatched to the customers from the factory or to the Depot and they are availing services of Goods Transport Agency for transportation of cement. The appellant were issued show cause notices for the period April’2008 to December’ 2008, Jan’2009 to August’2013, June’2014 to Jan’2015 and February’2015 to September 2015 proposing to deny cenvat credit availed on service tax paid on outward transportation of service tax. The demand was confirmed by the adjudicating authorities holding that the credit on GTA service is available as input service only up to place of removal after 01.04.2008 in terms of Rule 2 (l) of Cenvat Credit Rules, 2004. He held that in terms of Section 4 (3) (c) of the Central Excise Act. ‘place of removal’ means factory or any other place or premises of production or manufacture of the excisable goods; warehouse or any other place or premises wherein the excisable goods have been permitted to be stored without payment of duty; 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 the factory; from where such goods are removed”. That as per Board’s circular Nos. 37B order No. 59/1/2003 dt. 03.03.2003 and no. 97/8/2007 dt. 23.08.2007 the place where the sale takes place, is the place of removal. Further CBEC vide Circular No. 988/12/2014 –CX dt. 20.10.2014 has stated that the place where the sales take place is the place where the transfer in property of goods takes place from seller to buyer. He held that the Appellant has not produced any evidence showing the details such as name of depot/ dumpyard, quantity/ value of goods sent to their depots/ dumpyard and credit involved therein. For being eligible to avail credit one has to establish that the conditions of Board Circular of 98/7/2007 – ST dt. 23.08.2007 has been satisfied. That the Appellant has not produced evidence to this effect and hence the credit is not available to the Appellant. The adjudicating authority confirmed the demands. Being aggrieved the Appellant has filed the present appeal.
2. Shri Jigar Shah, Ld. Counsel appearing for the Appellant submits that they have cleared the goods on MRP basis to their Dealers! Stockist by making valuation under Section 4A. That in case of clearance to institutional consumers the Valuation under section 4 was adopted. In both the cases the goods are cleared on FOR basis and all the expenses upto delivery of goods including damage to the goods and transportation uptill the buyers doorstep is borne by the Appellants. The price charged to the customer is inclusive of freight and insurance charges. Hence the credit of service tax paid on freight amount is available to them. He also takes us through the invoices issued to this effect showing that no freight over and above invoice value is charged from the customers. In case of clearances of goods to the industrial and institutional consumers the valuation was made under Section 4 of the Act and the goods were cleared on FOR basis. He also submits that the contracts for sale clearly states that the freight has to be borne by the Appellants. He submits that the adjudicating authority has merely held that appellants would be eligible for credit of service tax paid on transportation of goods from factory to dump yard! depot (if that was the place of removal) but the Appellant has not produced any evidences showing the details as name of depot, quality, value of goods sent to their depots and credit involved therein. He submits that the findings of the adjudicating authority are cryptic as the demand calculation sheets to the show cause notice itself states that the goods were sent to dumpyards! depots and other buyers premises. That the same is absolutely clear from the excise invoice cum gate pass and hence the contention of the adjudicating authority is wrong. He also invited our attention to the copies of gate passes cum excise invoices on which clearances were made to depots/ stockists as well as institutional consumers. He also invites our attention to certificate issued by the Chartered/ Cost Accountant certifying that the goods were cleared on FOR basis and the freight charges are part of assessable value. He also relies upon the Board Circular No. 1065/4/2018- CX dt. 08.06.2018 wherein the CBEC has viewed that the “place of removal” is required to be determined with reference to “point of sale”. That in the present case since the liability of freight and damages to goods uptill doorstep of buyers is of Appellant, the point of sale is when the ownership of the goods changed hands i.e doorstep of buyers. In case of Appellant, he has also produced copy of OIO dt. 16.11.2016 pertaining to subsequent period wherein the adjudicating authority has held that the contracts are on FOR basis and hence credit has been allowed. He alternatively submits that the Cenvat Credit availed by the appellant on the outward transport charges cannot be recovered as the appellants have already discharged higher duty amount on the said services, since, the service charges was included in the assessable value of the final product cleared on payment of duty. He submits that if the Revenue is of the opinion that the factory gate is the place of removal in the said case the outward transportation charges is also not includible in the assessable value of the final product and consequently the same will not suffer excise duty. The excise duty so paid on the element of outward freight charges is much more than the Cenvat Credit availed on the outward GTA for the obvious reason that the Cenvat Credit on the outward transportation is only on the abated value of 25% whereas the entire 100% transportation was included in the assessable value of the final product. Therefore, for this reason the recovery on account of Cenvat Credit cannot be made. In this regard, he prepared a calculation and submitted in their written submissions which shows that the excise duty on the element of freight charges is much more than the element of Cenvat Credit availed of GTA. In this support, he placed reliance on judgment in the case of CCE Vs. Telco Limited-2016 (196) ELT 308 (T). As regard, withdrawal of the Circular dated 22.12.2014 and relevant para of Circular dated 23.08.2007 the same cannot have the retrospective effect for the reason that the Hon’ble Supreme Court in the case of Suchitra Vs. CCE -2007 (208) ELT 321(SC) held that beneficial Circular to be applied retrospectively while oppressive Circular applicable prospectively.
2.1 He further submits that the demand is hit by limitation as there is no suppression of fact on the part of the appellant. The issue of admissibility of Cenvat Credit on outward GTA involved matter of grave litigation in various judgments at various judicial forums, therefore, it cannot be said that the appellant suppressed any fact. Shri Jigar Shah Ld. Counsel also relied upon following judgments:
