Cenvat credit eligibility on outward freight.

PJ/CASE LAW/2015-16/2600

Case:-TK WARANA SSK LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE, KOLHAPUR

Citation:-2015 (37) S.T.R. 499 (Tri. - Mumbai)

Brief Facts:-The appellant M/s. TK Warana SSK Ltd. is a manufacturer of sugar and has filed the present appeal against Order-in-Appeal No. PUN-EXCUS-002-APP-004-14-15, dated 2-4-2014 passed by the Commissioner of Central Excise (Appeals), Pune-II.
The appellant is registered with Central Excise department manufacturing sugar, molasses and rectified spirit, special denatured spirit. Further, the appellant availed Cenvat credit of the inputs and input services for the purpose of manufacture and removal of goods. For the period August, 2011 to September, 2011, the appellant had taken credit for outward transport charges paid in terms of sale for delivery of sugar from their factory to the nearest railway station (FOR basis). As per the terms of sale the appellant had to deliver the goods from factory to the Port of Export at Mumbai and Gujarat for sale of sugar and for the purpose of export, the goods were sold on FOR basis and accordingly, the appellant incurred transport charges upto Port and Port Handling Chares at the port for which the appellant took Cenvat credit and also for sale of free sale sugar on FOR basis, the credit for transportation charges was taken.
A show cause notice, dated 21-8-2012 was issued to the appellant alleging that they had contravened the provisions of Rule 14 of Cenvat Credit Rules, 2004 inasmuch as they have wrongly availed Cenvat credit of Service Tax paid on outward and inward freight as not covered under definition of input service as mentioned under Rule 2(1) of the Cenvat Credit Rules, 2004. The appellant contested the show cause notice by filing reply and stated that the credit of input services includes such service under Rule 3 which are availed upto the place of removal and the place of removal is defined under sub-section 2(c) of Section 4 of the Central Excise Act includes any other place of removal from where the excisable goods are to be sold after the manufacture from the factory. Thus, in the case of the appellant, the place of removal will be railway station in the facts and circumstances and/or Port of Export and accordingly, the appellant is entitled to avail the Cenvat credit. The appellant also relies upon the Circular of C.B.E. & C. No. 97/8 /2007- Service Tax, dated 23-8-2007 and also relies on the ruling of this Tribunal in the case of M/s. Menon Pistons Ltd. - 2013-TIOL-243-CESTAT-MVM and also the ruling of the Tribunal in the case of Palco Metals Ltd. - 2012 (280) E.L.T. 299 (Tri-Ahmd.) = 2012 (26) S.T.R. 429 (T).
The said show cause notice was adjudicated by the Dy. Commissioner who have recorded the findings in respect of all the three sales by way of export and on FOR basis relying on the ruling of the Hon'ble High Court of Karnataka in the case of ABB Ltd. - 2011 (23) S.T.R. 97 (Kar.), wherein it is held that from 10-4-2004 onwards because of amendment to the definition on input services, the outward transportation no longer remains as input service as it has been specifically mentioned. However, it has been observed that Cenvat credit can be availed in case the assessee fulfils the condition laid down under the Board's Circular, dated 23-8-2007. The proposed demand of Cenvat credit was confirmed along with interest and equal amount of penalty was imposed under Rule 15 of the Cenvat Credit Rules, 2004 read with Section 11AC of the Central Excise Act.
Being aggrieved, the appellant had preferred appeal before the Commissioner (Appeals), who vide his order, dated 2-4-2014 was pleased to up-hold the Order-in-Original, save and except he allowed credit for removal of press-mud from the factory premises. The Commissioner (Appeals) also relied upon the ruling of the Hon'ble High Court of Kolkata in the case of M/s. Vesuvious India Ltd. - 2013-TIOL-1038-HC-KOL-ST = 2013 (298) E.L.T. 388 (T). Being aggrieved the appellant filed the appeal before this Tribunal.

Appellant contentions:-The learned Counsel for the appellant points out from Order-in-Original that the finding of the adjudicating authority are in favour of the appellant in view of the categorical finding that the appellant satisfies the three conditions as required by the C.B.E. & C. Circular, dated 23-8-2007. It is further evident from the order that there is no confusion with regard to nature of transaction and/or the nature of sale for which transportation services was availed. Thus, the rejection of the Cenvat credit on the ground that the appellant failed to submit any concrete evidence such as copy of purchase order to prove its contention on claim, is self contradictory and by way of surmises. Further, the appellate Commissioner has not interfered with the finding of fact and as such the impugned order is fit to be set aside. The appellant also relies on the final order No. A /783-784 /14 /SMB/C-IV of this Tribunal, dated 8-4-2014 in case of Anshul Steels Ltd., wherein this Tribunal has held that where the adjudicating authority has dearly held that the appellant have complied the condition of C.B.E. & C. Circular, dated 23-8-2007 and in such circumstances, it is entitled to take Cenvat credit of outward transportation of freight.

Respondent contentions:-The learned Assistant Commissioner (AR) appearing for the Revenue relies on the impugned order and states that the appellant be put to terms. On query from the Bench with regard to the finding of facts recorded by the jurisdictional authority in favour of the appellant, the learned AR has nothing to say.

Reasoning of Judgment:-Heard both sides. As the matter is covered by the ruling of the Tribunal in the case of M/s. Anshul Steels Ltd. vide final order No. A/783-784 /14- SMB /C-IV, dated 8-4-2014, after waiving the requirement of pre-deposit, the appeal was taken up for final disposal.
Having considered the rival contentions and the grounds of appeal, it was found that the Cenvat credit for services availed by the manufacturer is available from the place of removal, which in the appellant's case herein is railway station on the goods have been sold on FOR basis and Port at which goods have sold at FOB basis. Further, it was found that the findings of facts are in favour of the appellant to the effect that the appellant have satisfied the three conditions specified in the Circular. Further, it was found that the ruling of the Hon'ble Kolkata High Court in the case of Vesuvious India Ltd. (supra) is not applicable in the facts of the present case as Circular, dated 23-8-2007 issued by the Board has not been quashed and the Hon'ble High Court has observed that the Circular had made relaxation in some cases having factual background as indicated therein. It was further observed that on such basis it cannot be said that because in some cases, the outward transport charges on which Service Tax is payable is claimable, in all such cases such benefit will be available.
Further, Tribunal agreed with the appellant that the Hon'ble .Gujarat High Court in the case of Commissioner of Central Excise v. Inductotherm India Pvt. Ltd. [2014 (3) TMI-921 (Guj. HC) = 2014 (36) S.T.R. 994 (Guj.)] has held that in case of export of Cargo Handling Services, the Service Tax paid thereon is available as input services, as in such case, the place of removal is Port. Thus, the impugned order is set aside and appeal is allowed in favour of the appellant. It is held that the appellant is entitled to Cenvat credit on transportation charges/freight which is incurred for removal of goods till the railway station (on FOR basis) or the Port, as the case may be. The stay petition is also disposed of.

Decision:-Appeal allowed.

Comment:-The crux of the case is that credit of service tax paid on outward transportation is admissible in case of FOR sales if the three conditions specified in C.B.E. & C. Circular No. 97/8/2007-S.T., dated 23-8-2007 are satisfied. Although, it is also worth noting that recently, Kolkata High Court in the case of Vesuvious India Ltd. has held this issue against the assessee.

Prepared By:Meet Jain

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PJ/CASE LAW/2015-16/2600

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