By TIOL News Service

NEW DELHI, FEB 06, 2018: THE respondent  M/s. Andhra Sugars Ltd. are manufacturers of sugar , molasses etc. at their Tanuku, Taduvai & Bhimadole units and manufacturers of various inorganic chemicals at their Kovvur and Saggonda units.

They were availing credit on inputs, capital goods and input services and utlising the same for payment of duty. It came to the notice of the Revenue that during the period December 2007 , the respondent at their unit Saggonda, had taken credit of input services namely service tax paid on transportation charges upto the place of customers which according to the Revenue is inadmissible.

Accordingly, SCN dated November 3, 2008 was issued demanding Cenvat Credit of Rs.3,87,763/-.

The Assistant Commissioner confirmed the demand.

However, the Commissioner(A) set aside this order and the Revenue appeal was dismissed by the CESTAT holding that the issue is covered by the decision of the High Court of Karnataka in the case of  Commissioner of Central Excise and Service Tax, Bangalore v. ABB Ltd., Vadodara -   2011-TIOL-395-HC-KAR-ST.  The Tribunal also observed that the Revenue could not have filed appeals as per the instructions of the CBEC vide Circular F. No. 390/Misc./163/2010-JC dated August 17, 2011, as the amount involved is less than Rs.5 lakhs.

Aggrieved, the Revenue took the matter to the High Court but this appeal was dismissed holding that "on an identical issue, this Court had dismissed Central Excise Appeal No. 31 of 2013".

Resultantly, the Revenue filed Civil Appeals before the Supreme Court.

The apex Court took note of the definition of 'input service' which was prevailing at the relevant period i.e. prior to April 1, 2008 as well as the meaning of the term ‘place of removal' contained in section 4 of the CEA, 1944 and also adverted to the Circular No. 97/8/2007-ST dated August 23, 2007.

The Supreme Court inter alia observed –

++ As per the Department, outward transportation engaged for removal of goods from factory to customer premises cannot be considered as an input service since premises of customer is not recognized as a place of removal under the Central Excise Act. To put it differently, the Department contends that the outward transportation provided beyond the place of removal is not eligible for input service for availing Cenvat Credit.

++ Having regard to the definition of 'input service' that was prevailing at the relevant time i.e. prior to April 1, 2008 , the aforesaid contention of the Department cannot be accepted. As per the said definition, service used by the manufacturer of clearance of final products 'from the place of removal' to the warehouse or customer's place etc., was exigible for Cenvat Credit. This stands finally decided in  Civil Appeal No. 11710 of 2016   (Commissioner of Central Excise Belgaum v. M/s. Vasavadatta Cements Ltd. ) vide judgment dated January 17, 2018.

++ The matter is squarely covered by the Board's Circular dated August 23, 2007, relevant portion whereof is as under: x x x

++ The three conditions which were mentioned explaining the 'place of removal' are defined in Section 4 of the Act. It is not the case of the Department that the three conditions laid down in the said Circular are not satisfied. If we accept the contention of the Department, it would nullify the effect of the word 'from' the place of removal appearing in the aforesaid definition. Once it is accepted that place of removal is the factory premises of the assessee, outward transportation 'from the said place' would clearly amount to input service. That place can be warehouse of the manufacturer or it can be customer's place if from the place of removal, the goods are directly dispatched to the place of the customer. One such outbound transportation from the place of removal gets covered by the definition of input service.

Concluding that there is no infirmity in the impugned judgment, the Revenue Appeals were dismissed.

(See 2018-TIOL-45-SC-CX)