Credit of service tax paid on outward transportation of goods to depot.

PJ/CASE LAW/2015-16/2690

Case:-M.P. BISCUITS PVT. LTD. VERSUSCOMMISSIONER OF C. EX., ALLAHABAD

Citation:- 2012 (282) E.L.T. 563 (Tri. - Del.)

Brief facts:-This appeal is directed against the order of CCE (Appeals), Allahabad dated 19-7-2011 whereby the appeal against the adjudication order No. ST(95/09) 47/10 dated 6-5-2010 whereby the Joint Commissioner, Central Excise, Allahabad have denied Cenvat credit in respect of Service tax amounting to Rs. 6,44,299/- to the appellant and confirmed the demand and said amount with appropriate interest and also imposed the penalty of equal amount.
Along with appeal the appellant filed stay application under Section 35F of the Central Excise Act, seeking the waiver of condition of pre-deposit. After hearing arguments on stay application, they were of the view that the appeal itself can be disposed of as such with the consent of the parties the condition of pre-deposit of duty demand, interest and penalty is dispensed with and appeal was heard.
Briefly statedfacts relevant for the disposal of this appeal are that M/s. M.P. Biscuits Pvt. Ltd. the appellant herein, are engaged in manufacture of biscuits on job work basis for Parle Biscuits Pvt. Ltd. (PBPL), Mumbai. The biscuits manufactured by the appellant during the period March 2005 to April, 2006 were cleared from their premises on payment of excise duty on MRP basis in terms of provisions of Section 4A of the Central Excise Act. The appellants claimed and avail Cenvat credit to the tune of Rs. 6,44,299/- in respect of Service tax paid by them on outward transportation of the goods from their factory to the depot/premises of PBPL.
The department was of the view that since the place of removal of biscuit was factory premises, the appellants were not entitled to Cenvat credit in respect of Service tax paid on outward transport of biscuits to the depot of PBPL as outward transportation could not be termed as input services as defined under Section [(sic) Rule] 2(l) of Cenvat Credit Rules, 2004.
Accordingly, a show cause notice was issued to the appellant. The appellant contested the notice claiming that outward transportation charges were covered within the definition of input services as defined under Cenvat Credit Rules, 2004. The adjudicating authority after giving due hearing to the appellant confirmed the demand of Rs. 6,44,299/- with appropriate interest and also imposed penalty of equal amount. The appellant preferred an appeal against the order of adjudicating authority and the Appellate Authority. However, vide impugned order confirmed the order-in-original and dismissed the appeal.

Appellant’s contention:- Ld. Sh. Jatin Mahajan, Advocate, for the appellant while assailing the impugned order submitted that the appellant is job worker engaged in manufacture of biscuit on behalf of principal manufacturer PBPL. He has drawn attention to the copy of the letter dated 15-3-2005 addressed to the Assistant Commissioner/Dy. Commissioner, Central Excise Division, Varanasi by M/s. PBPL whereby they authorized the appellant company to manufacture biscuits on their behalf. He has also drawn our attention to the copy of the job work agreement between M/s. PBPL and the appellant whereby the appellant was supposed to process and manufacture biscuits on behalf of PBPL and also to carry out inspection packing and delivery of manufactured biscuits to various depot of M/s. PBPL as per direction of M/s. PBPL. Clause 3 of the terms and conditions mutually agreed between the appellant and M/s. PBPL provides that the appellant i.e. contract manufacturing unit would avail Cenvat credit of central excise duty paid on the raw material, capital goods and Service tax. It is submitted by ld. Counsel for the appellant that in terms of the aforesaid agreement and authorization by the principal manufacturer the appellant manufacture the biscuits and transport them to the various depot of M/s. PBPL regarding which they paid transportation charges as also Service tax. Ld. Counsel submits that the outward transportation of manufactured goods falls within the definition of input service as defined under Section [(sic) Rule] 2(l) of CCR, 2004 as such the appellant entitled to avail the Cenvat credit in respect of Service tax paid regarding the outward transportation of the biscuits. It is submitted that the adjudicating authority as well as the appellate authority have passed the impugned orders ignoring the terms and condition agreed between the appellant and principal manufacturer PBPL and also the form TR-6 for payment of Service tax in respect of outward transportation submitted by the appellant in respect of the period in dispute. Thus, it is argued that the order-in-original as well as the order-in-appeal are liable to be set aside. In support of his contention, ld. Counsel for the appellant has relied upon the judgment of Karnataka High Court in the matter of CCE & ST, LTU, Bangalore v. ABB Limited reported in 2011 (23)S.T.R.97 (Kar.)as also the judgment of the Tribunal in the case of M/s. Parsons Nutritionals Pvt. Ltd. v. CCE, Ghaziabad.

Respondent’s contention:-Refuting the argument, Sh. NageshPathak, ld. AR for the respondent submitted that in the instant case the place of removal of manufactured biscuits is the factory of the appellant, therefore, outward transportation of biscuits does not fall within the ambit of input service as defined under Section [(sic) Rule] 2(l) of the Cenvat Credit Rules, 2004. Those payment of Service tax on transport charges would not entitled the appellant to avail Cenvat credit.

Reasoning of judgement:- It is not disputed that the appellant is a job worker manufacturing biscuit on behalf of PBPL and clearing those biscuits on payment of excise duty on MRP basis.
Rule 3(xi)(ii) of Cenvat Credit Rules, 2004 provides that a manufacturer or producer of final product shall be allowed to take Cenvat credit of any input services received by the manufacturer of final product on or after 10th of September, 2004.
Input service is defined under Rule [2(l)(ii)] of Cenvat Credit Rules, 2004 which reads thus :-
“(ii) Used by the manufacturer, whether directly or indirectly, in or in relation to the manufacture of final products and clearance of final products from the place of removal,”
Reading of above provision clearly show that outward transportation of the manufactured product up to the place of removal falls within the definition of input service. The appellant has placed on record the authorization letter dated 15-3-2005 addressed by PBPL to Assistant/Deputy Commissioner, Central Excise, Varanasi authorising the appellant to manufacture biscuit on their behalf. Further perusal of the terms and conditions mutually agreed upon between PBPL and the appellant would show that as per the job work contract the appellant were required to process and manufacture biscuit, carry out inspection, packing and delivery to various depots of PBPL located all over the country as directed by PBPL. From the above stipulation in the contract, appellants were under obligation to transport biscuits to various depots of PBPL as such obviously the place of removal was/were depots where the appellant was required to supply manufactured biscuit as per direction of the appellant. Admittedly, the appellants have transported the goods to the depots/premises of the principal manufacturer and paid transportation charges including the Service tax. In this regard, the appellant have placed on record photocopies of Form TR-6 for payment of Service tax in respect of the period in question. Thus, it is apparent that the appellant has paid Service tax in respect of the input service i.e. the outward transportation of the biscuits to the place of removal. As such, in view of Rule 3 of Cenvat Credit Rules the appellant has rightly availed Cenvat credit.
Result of theabove discussion is that the impugned orders denying Cenvat credit to the appellant is not sustainable. Appeal is, therefore, accepted and the impugned order also order-in-original are set aside.

Decision:- Appeal allowed.

Comment:-The analogy of the case is that as per job work contract, the appellant were required to process and manufacture biscuit, carry out inspection, packing and delivery to various depots of principal manufacturer located all over the country and so the place of removal in present case will be the depot and not the factory premises. Hence, when the place of removal is depot, the service tax paid on transportation of goods will be covered by the defination of input service and will be eligible for credit availment.

Prepared by:- Monika Tak

Comments

PJ/CASE LAW/2015-16/2690

Post a Comment

Query