Case Law Details

Case Name : Lafarge India (P.) Ltd. Vs Commissioner of Central Excise, Raipur (CESTAT Delhi)
Appeal Number : Stay Order No. 1061 of 2012-EX (BR)
Date of Judgement/Order : 10/07/2012
Related Assessment Year :
Courts : All CESTAT (770) CESTAT Delhi (273)

CESTAT, NEW DELHI BENCH

Lafarge India (P.) Ltd.

versus

Commissioner of Central Excise, Raipur

Stay Order No. 1061 of 2012-EX (BR)

Application No. E/Stay/3810 of 2011

Cross Objection No. 95 of 2012

Appeal No. 2962 of 2011

July 10, 2012

ORDER

Rakesh Kumar, Technical Member

The appellant manufacture cement clinker and cement chargeable to Central excise duty under Chapter 25 of the Central Excise Tariff in their factory at Sonadih. They avail Cenvat credit of central excise duty paid on inputs and capital goods and service tax paid on input services used in or in relation to manufacture of their final product. The clinker manufactured at Sonadih plant is stock transferred by road to depot at Nipania railway siding from where it is transported to the appellant company’s Jojobera cement factory by rail. The clinker is cleared from Sonadih plant on payment of duty. The cement manufactured at Sonadih plant is cleared on payment of duty to their cement depot from where the same is sold. The duty on cement sold from depot is paid on sale price of cement at the depot. During period from April 2009 to March 2010, the appellant took Cenvat credit of service tax paid on outward transportation of –

(a)  cement from Sonadih factory to cement depot (Cenvat credit of Rs. 22,50,525/-); and

(b)  clinker from Sonadih factory to Nipania depot (Rs. 38,54,409/-)-

The department being of the view that the appellant are not eligible for Cenvat credit of Rs. 61,04,934/- (Rs. 22,50,525 + Rs. 38,54,409/-) issued a show-cause notice dated 03/5/10 for –

(a)  recovery of Cenvat credit amounting to Rs.61,04,934/- on outward transportation along with interest on it under section 11AB; and

(b)  imposition of penalty on the appellant under Rule 15 (2) of Cenvat Credit Rules, 2004 read with Section 11AC of Central Excise Act, 1944.

1.1 The above show-cause notice was adjudicated by the Commissioner vide order-in-original dated 25/8/11 by which –

(a)  while Cenvat credit demand of Rs. 22,50,525/- in respect of transportation of cement from Sonadih factory to the sales depot was dropped, the Cenvat credit demand of Rs. 38,54,409/- in respect of transportation of clinker from Sonadih factory to Clinker depot at Nipania railway siding was confirmed along with interest under section 11AB; and

(b)  penalty of Rs.38,54,409/- was imposed on the appellant under Rule 15 of Cenvat Credit Rules, 2002.

1.2 Against the above order of the Commissioner, this appeal along with the stay application has been filed.

2. Heard both the sides in respect of stay application.

3. Shri Abhratosh Majumdar, Advocate, the learned Counsel for the appellant, pleaded that in respect of clinker cleared on stock transfer basis to Nipania Depot from where the same was transported by rail to the appellant company’s Jojobera cement plant, it is the sister unit at Jojobera which is the place of removal, that since clinker had been cleared to Jojobera plant on stock transfer basis and as such, there was no change of ownership, the road transportation service availed for transportation from Sonadih to Nipania Depot would have to be treated as input service, that the Commissioner has wrongly treated the factory gate of the Sonadih factory as the place of removal, that in terms of definition of ‘input service’ in Rule 2 (1) of Cenvat Credit Rules, 2004, as it stood during the period of dispute, the GTA service up to the place of removal is covered by the definition of ‘input service’, that even if the duty on clinker was paid at specific rate, in terms of Board’s Circular No. 137/3/06-CX dated 2/2/06, Cenvat credit in respect of GTA service up to the ‘place of removal’ cannot be denied, as the issues of ‘valuation’ and ‘Cenvat credit’ are independent, that in this case, Cenvat credit is admissible even in terms of Board’s Circular No. 97/8/2007-ST dated 23/8/07, that the appellant have a strong prima facie case and hence the requirement of pre-deposit of Cenvat credit demand, interest and penalty may be waived for hearing of the appeal and recovery thereof may be stayed till the disposal of the appeal.

4. Shri S.R. Meena, the learned Senior Departmental Representative, opposed the stay application and reiterating the findings of the Commissioner in the impugned order, emphasised that since the clinker has been cleared by the appellant unit on stock transfer basis for captive use of its sister unit at Jojobera, the place of removal of the cement would be the factory gate, not the factory premises of Jojobera cement plant, and that the GTA service availed for transportation of clinker from the factory to depot at Nipania railway siding is not covered by the definition of ‘input service’. He, therefore, pleaded that this is not a case for waiver.

5. We have carefully considered the submissions from both the sides and perused the records.

6. The point of dispute in this case is as to whether the service of GTA availed for transportation of clinker from Sonadih plant to Nipania railway siding for onward transportation by rail to Jojobera plant of the appellant company, is covered by the definition of ‘input service’. There is no dispute that the clearances of clinker by Sonadih plant of the appellant company to their Jojobera plant for use in the manufacture of cement were on stock transfer basis, not on sale basis. There is also no dispute that during the period of dispute, the definition of “input service” as given in Rule 2 (1) of Cenvat Credit Rules, 2004, covered the outward transportation upto the “place of removal”. The dispute is as to whether the factory gate of ‘Sonadih plant’ of the appellant company in the “place of removal”, or the factory of appellant at Jojobera is the ‘ place of removal”.

7. We are of the view that the definition of “place of removal”, as given in Section 4 (3) (c) of the Central Excise Act, 1944, is relevant only for the purpose of determining the assessable value of the goods when the duty chargeable on the goods is at an ad valorem rate. From the very first sentence of Section 4 it is dear that the provisions of this Section are attracted only when the duty on the goods is at an ad valorem rate and for this purpose, the “assessable value” on which duty at ad valorem rate is to be calculated has to be determined. It is in this context that sub-Section (3) (c) of Section 4 defines the “place of removal”, as the assessable value is the “transaction value”, as defined under Section 4 (3) (d) at the “time and place of removal”. In fact sub-Section (3) of Section 4 defines various terms including ‘ place of removal” for the purpose of this Section, i.e. Section 4 which is applicable only when the rate of duty is ad valorem. Though in terms of Rule 2 (t) of Central Credit Rules, 2004, the words and expressions not defined in these rules but defined in the Central Excise Act, 1944 or Finance Act, 1994 shall have meaning respectively assigned to them in those Acts, it is doubtful whether the definition of ‘place of removal’ in Section 4 (3) (c), which is only for the purpose of determining assessable value under Section 4, can be adopted for Cenvat Credit Rules, 2004 in all the cases. In our view, the definition of ‘place of removal’ in Section 4 (3) (c) of Central Excise Act can be adopted for Cenvat Credit Rules, 2004, only when the duty on the final product is ad valorem and not when the duty on the final product is specific or is charged on tariff value fixed under Section 3 (2), Though in terms of Board’s Circular No. 137/3/06-CX dated 2/2/06, when the goods cleared from the factory are sold from the depot and for the purpose of determining the assessable value of the goods under Section 4, it is the depot which is the ‘place of removal’ and for this reason, the assessable value includes the cost of transportation of the goods from the factory gate to the Depot, the Cenvat credit of service tax paid on the transportation up to Depot would be admissible even if the goods attract duty at a specific rate, the correctness of this circular is doubtful as from the language of Section 4 (3) it is clear that the definitions of various terms, including ‘place of removal’ are only for the purpose of this section i.e. Section 4 and therefore the definition of ‘place of removal’ in Section 4 (3) (c) cannot be applied to Cenvat credit Rules in the cases where the duty on the final products is charged at specific rate or on tariff values fixed under Section 3 (2), In our view, the definition of ‘place of removal’ in Section 4 (3) (c) can be adopted for Cenvat Credit Rules only in those cases where the rate of duty is ad vaiorem and the duty is charged on value determined under Section 4. In this case, the duty on the goods -clinker is at specific rate and hence we are of prima facie view that the definition of “place of removal” in Section 4 (3) (c) would be of no relevance. We are of prima facie view that in this case, the “place of removal” would be the “place of removal” for the purpose of Rule 4 of Central Excise Rules, i.e. the places on removal from where the duty is liable to be paid, which in this case, is the factory gate of Sonadih factory, as the duty on clinker becomes payable at the time of removal from Sonadih factory. Therefore, the GTA service for transportation of clinker from Sonadih factory to Nipania depot, having been availed after the removal of the clinker from the factory, is ‘prime facie’ not covered by the definition of ‘input service’.

8. In view of the above discussion, the appellant have not been able to establish prima facie case in their favour and hence this is not a case for waiver. The appellant, therefore, are directed to deposit the disputed amount of Cenvat credit demanded from them within a period of few weeks from the date of this order. Compliance to be reported 24/8/2012. On deposit of this amount within the stipulated period, the requirement of pre-deposit of interest and penalty shall stand waived and recovery thereof waived till the disposal of the appeal. The stay application stands disposed of, as above.

NF

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