The key findings of HC in its judgment [TS-342-HC-2014(CHAT)-EXC]

 Customs, Excise & Service tax Appellate Tribunal (‘Tribunal’), Delhi order in the case of Ultratech Cement Limited vs. CCE [TS-248-Tribunal-2013-EXC] , wherein it was held that for the goods where duty is chargeable at specific rates or at the value determined under Section 4A and not at ad-valorem rates under Section 4, the definition of ‘place of removal’ as given in Section 4(3)(c) of the Central Excise Act, 1944 would not be applicable for Cenvat credit purposes and as such the ‘place of removal’ will be the factory gate.  Therefore, in such cases, Cenvat Credit cannot be availed with respect to service tax paid on transportation of final products beyond the factory gate. 

Background of the case

·         Assessee is manufacture of cement chargeable to Excise duty at specific rates and not on ad-valorem rates (i.e. the removals were not covered under Section 4 of the Excise Act);

 

·         Assessee had availed CENVAT credit of Service tax paid on transportation of goods from factory to customer’s premises, from factory gate to depot and from depot to customer’s premises;

 

·         Since the term ‘place of removal’ is defined in Sec 4 of the Excise Act, the Excise authorities denied credit on the ground that since final products are not chargeable to duty under Section 4 of the Excise Act, the definition of place of removal given under Sec 4 cannot be borrowed for credit purposes. Therefore, the factory gate should be the place of removal and transportation of goods beyond the factory gate is not eligible for the benefit of CENVAT Credit;

 

·         Key submission made by Assessee against the order was that the term ‘place of removal’ is not defined in the Credit Rules, it would have to be borrowed from Section 4 of the Excise Act by virtue of Rule 2(t) of the Credit Rules which provides that meanings of the terms and expressions not defined in the Rules but defined in the Excise Act would have to be construed accordingly;

 

·         Tribunal decided the matter in favor of Revenue 

Recent Development

An appeal was filed before the High Court of Chhattisgarh (‘HC’) by the Assessee and HC has found the order of Tribunal to be incorrect. The key findings of HC in its judgment [TS-342-HC-2014(CHAT)-EXC] are mentioned below:

·         There is no provision in the Excise Act or in the Rules or any Circular issued by CBEC to hold that where duty is charged on the specified rate, then the place of removal will be factory gate

 

·         If the Legislature or the Central Government or CBEC wanted the ‘place of removal’ to be factory gate in case of payment of Excise duty on specified rate, then the same could have been defined in the Act or Rules. Thus, factory gate cannot be the place of removal as a presumption of law.

·         It was earlier held by the Division Bench of this Court in the case of Lafarge India Limited v. Commissioner of Central Excise, Raipur (Tax case 34 of 2011) that- though Section 4(3)(c) defines the word ‘place of removal’ for purpose of that section but in absence of its meaning for other sections, it would be applicable unless it is otherwise provided.

·         It has to be ascertained from facts and circumstances of each case as to what is the place of removal and it cannot be presumption of law as decided by Tribunal.

·         Matter is remanded back to adjudicating authority to determine whether place of removal would be factory gate or premises of the consumer. Where the place of removal is found to be premises of the consumer, Cenvat credit of such input service would be allowed.