By TIOL News Service

BILASPUR, AUG 25, 2014: FACTS of the case –

Three appeals were filed by the appellant before the CESTAT against the orders of the Commissioner of Central Excise. They wereE/381/2010 (CCE, Raipur) E/2440/2011 (Chandigarh) E/112/2012 (CCE, Raipur).

The Appellants are manufacturers of cement and cement clinker.

The sales are through depots. The goods are first transported to depots from where the same are sold to customers. While the Department had allowed the CENVAT credit of service tax paid on GTA service availed for transportation from the factory up to the depot, the CENVAT credit of service tax paid for transportation from the depots to the customers' premises was disallowed on the ground that the GTA service availed for transportation up to the 'place of removal' only can be treated as input service and in respect of the goods sold from the depot, it is the depot, which is the 'place of removal'.

The Appellant, however, claimed that their sales were on FOR destination basis and hence it is the customers' premises, which have to be treated as the 'place of removal'.

The CCE, Chandigarh did not agree and confirmed the demand of Rs.1.02 crores along with interest and equivalent penalty.

In respect of the plant located at Raipur while some quantity of the cement manufactured is dispatched from the factory directly to the customers on sale, the remaining quantity of the cement is transferred to a dump from where the same is sold to the customers either directly or by delivering to customers' premises. In the aforesaid instances, entire amount of CENVAT Credit of service tax paid on GTA Service availed for transportation of cement from factory gate to customers' premises or from factory gate to Dump and Dump to Customers' premises has been disallowed.  However, Credit of the service tax paid on GTA Service availed for transportation of cement from the factory gate to dump in respect of cement sold from the dump has been allowed by treating the cement Dump as the 'place of removal'.

The CENVAT credit involved in these cases is Rs.3.18 Crores and Rs.90.96 lakhs respectively and the demands have been confirmed by the CCE, Raipur .

The period of dispute is from January '05 to March '2009; from April '09 to March '2010 and from July'09 to 17.05.2010.

The Tribunal vide its order dated 18.11.2013 reported by us as 2014-TIOL-478-CESTAT-DEL held -

(i) There was some confusion in the law and as such, the extended period of limitation was not available so far as the notice dated 20.05.2009 is concerned;

(ii) In case the excise duty is charged on the specified rate, then the place of removal is the factory gate;

(iii) In the present case as on cement, the excise duty is charged on the specified rate, the place of removal is the factory gate of the Assessee and not the premises of the consumer.

In view of the second and third finding recorded by the Tribunal, it remanded back the matter to the Commissioner-Raipur for re-quantification.

Aggrieved by this order, the Assessee filed two tax cases before the Chattisgarh High Court in the matters arising from the notices issued by the Commissioner, Raipur.

The following are the two questions of law:

(i) Whether in the case where the rate of duty is specific, the place of removal would be factory gate or the customer premises.

(ii) Whether the authorities below have confirmed the demand after disallowing the credit on an issue, which was not proposed in the show cause notice.

The Department had also filed a Tax case challenging the finding of the Tribunal that the entire demand for the period prior to 01.04.08 would be time barred

On the Tax case filed by the department, the High Court held that there was no illegality in the finding of the Tribunal on limitation and, therefore, the same was dismissed .

In the matter of the Tax case filed by the assessee, the High Court took note of the provisions of sections 3, 4, 37 of the CEA, 1944 and rule 2(l) of the CCR, 2004 and observed –

++ Rule 2(l) of the Rules provides 'input services' to mean, apart from other things, the service used by the manufacturer for clearance of the final product upto the place of removal. It further clarifies that input service includes an outward transportation upto the place of removal.

++ In this case, the Tribunal has held that in case where the excise duty is charged on the specified rate, then the place of removal is the gate of the factory. It has been held as presumption of law.

++ There is no provision in the Act or in the Rules or in any circular issued by the Board of Central Excise and Customs, New Delhi (the Board) to hold that in case the duty is charged on the specified rate, then the place of removal will be factory gate.

++ If the legislature or the central government, or the Board wanted the 'place of removal' to be the factory gate in case of payment of excise duty on specified rate then they could so define it in the Act or in the Rules or in any of the circulars. They having failed to do so have clarified their intention that in such a case factory gate cannot be place of removal, as a presumption of law.

In fine, the High Court held that the presumption by the Tribunal that the place of removal is factory gate of the manufacturer in case the excise duty is charged on the specified rate is incorrect.

Adverting to its decision in Tax Case- 34 of 2011 (Lafarge India Limited v. Commissioner, Central Excise, Raipur ), the High Court observed that it is to be decided on the facts and circumstances of each case as to what is the place of removal.

The High Court concluded –

(a) The two tax cases namely Tax Case- 08 and 09 of 2014 filed by the Assessee are partly allowed. The Commissioner-Raipur may again decide the place of removal and then decide the case afresh. This may be done in the light of the observations made in this judgement;

(b) The tax case namely Tax Case- 23 of 2014 filed by the Department for invoking larger period of limitation is dismissed and the finding of the Tribunal in that regard is upheld;

Suffice to mention that the Tax Cases filed by the assessee were partly allowed and the Tax Case filed by the Department was dismissed.

In passing : Incidentally, the Assessee has also filed Central Excise Appeal - 15 of 2014 before the Punjab and Haryana High Court in respect of the order of the Tribunal arising in the appeal from CCE, Chandigarh. And more importantly, the Budget day notification 21/2014-CE(NT) dated 11.07.2014 has amended rule 2 of the CCR, 2004 to insert a new clause “qa” defining the term “place of removal” and which is bound to add another interesting dimension to the case.

(See 2014-TIOL-1437-HC-CHHATTISGARH-CX)