Whether credit of GTA services availed from factory to job work premises deniable for reason that it is beyond place of removal?

PJ/CASE LAW/2016-17/3119

Case:-CADBURY INDIA LTD. VERSUSCOMMISSIONER OF CENTRAL EXCISE, MUMBAI-III

Citation-2016 (42) S.T.R. 155 (Tri. - Mumbai)

Brief Facts:-This appeal is directed against Order-in-Appeal No. PKS/367/BEL/2010, dated 7-10-2010 passed by the Commissioner of Central Excise (Appeals), Mumbai-III, wherein ld. Commissioner (Appeals) upheld the order-in-original rejecting the appeal of the appellant. The fact of the case is that the appellant availed Cenvat credit in respect of outward GTA used for removal of intermediate goods either to job worker or to their own other units. Show cause notice was issued for denial of credit amount of Rs. 4,21,099/- for the period June 2005, December, 2008 and also proposed demand of interest under Section 11AB, penalty under Section 11AC. Show cause notice was adjudicated by the adjudicating authority wherein demand was confirmed vide order-in-original dated 29-1-2010, apart from demand, levy of interest under Section 11AB and penalty of Rs. 4,30,977/- was imposed under Section 11AC. Aggrieved by the original order, the appellant filed appeal before the Commissioner (Appeals), who upheld the order-in-original and rejected the appeal of the appellant, therefore, appellant is before Tribunal.

Appellant’s Contention:-Shri M.P. Baxi, ld. Counsel for the appellant submits that the appellant has availed Cenvat credit in respect of service tax paid for the transportation of intermediate goods either to job worker or to the other unit. This intermediate goods, from the job worker, after processing returned back to the appellant’s factory, thereafter final product is cleared on payment of duty. In case of intermediate goods cleared to their other factory the same is used for manufacture of other final product and the final product is cleared on payment of duty. It is his submission that the clearances to job worker and their own factory is before the place of removal for the reason that when the goods are cleared to the job worker though the excise duty is paid but goods is not sold. After job work it comes back to the appellant factory and thereafter it is use in the further manufacture of the final product and thereafter final product is cleared for sale. Therefore, sale takes place only after return of the job work goods and further use in the manufacture. Similarly in case of removal of goods to their own factory, there is no sale for very simple reason that within the same company, it is only stock transfer and not sale. Actual sale takes place only from their other factory from where the goods are sold, therefore, in both cases whatsoever transportation services are used, it is before the stage of sale of the goods and therefore, services are clearly covered under the input service which is used in or in relation to the manufacture of final product and also before the place of removal. He submits that both the lower authorities denied the Cenvat credit only on the ground that since the intermediate goods for which transportation services were used have been cleared on payment of duty, therefore, appellant factory is place of removal. He submits that as per the definition of place of removal in term of Section 4(3)(c) of Central Excise Act, 1944, the place of removal includes a place from where the excisable goods are to be sold after their clearance from the factory. In the present case, in both the cases, while clearing the goods it is not sold therefore, factory of the appellant is not place of removal, the goods are finally sold after returned back from the job worker or from their other unit. Therefore, both the lower authorities have misinterpreted the place of removal and hence the denial of credit is also not correct.

Respondent’s Contention-On the other hand, Shri Sanjay Hasija, ld. Superintendent (AR) appearing on behalf of the Revenue reiterates the findings of the impugned order. He further submits that the goods cleared from the appellant factory is on payment of duty either in the case of clearance to the job worker or their own other unit. Once the goods is cleared on payment of duty thereafter it cannot be said that it is not a sale in from the place of removal. Therefore, it cannot be said that factory of the appellant is not place of removal. Since the factory gate of the appellant is place of removal in the present case GTA use for removal of goods from the factory either to the job worker or to their own unit is beyond the place of removal therefore, Cenvat credit of service tax paid in respect of said GTA is not admissible.

Reasoning of Judgement-The tribunal have carefully considered the submissions made by both sides. They find that both lower authorities have confirmed demand of Cenvat credit on GTA only on the ground that clearances to the job worker and their own unit made on payment of duty, for this reason it was contended that factory of the appellant is place of removal and credit cannot be allowed beyond the place of removal. They find that though the goods were cleared on payment of duty but it is admittedly not clearance for sale of the goods. In terms of Section 4(3)(c) of Central Excise Act, 1944, definition of place of removal is as under :

‘Place of removal’ means :-

(i)         a factory or any other place or premises of production or manufacture of excisable goods;

(ii)        a warehouse or any other place or premises wherein the excisable goods have been permitted to be deposited without payment of duty;

(iii)       a depot, premises of a consignment agent or any other place or premises from where the excisable goods are to be sold after their clearances from their factory.
from where such goods are removed.”

From the above definition, it is clear that where the goods is cleared from factory, but place of removal is determined only a place, where the goods is sold. In case goods is sold from factory, the factory gate is considered as place of removal but though the clearances is made from the factory but goods is not sold from factory, but sold at any other place after removal of goods from the factory, the said place from where the goods is sold shall be the ‘place of removal’. In the instant case though the goods were cleared on payment of duty from the factory of the appellant but not sold from the factory. In case of job work goods the sale of the finished goods took place from the appellant factory and in case of removal of goods to their own other unit the sale took place from that other unit. Therefore, in the present case transportation (GTA) service is used up to the place of removal and hence qualified as input service. As per this clear position in law, the bench was of the view that GTA in the present case being used up to the place of removal covered under the definition of input service and hence admissible for Cenvat credit. Therefore, the impugned order was set aside and the appeal was allowed with consequential relief, if any, in accordance with law.

Decision:- Appeal allowed.

Comment:-The analogy of the case is that according to Section 4(3)(c) of Central Excise Act, 1944, ‘place of removal’ is place from where goods are sold. Thus, in the given case, although the intermediate goods are removed to job worker’s place and to other unit, such removal does not amount to sale of goods. Therefore , GTA service used for transportation of goods cannot be considered as beyond place of removal but is rather upto the ‘place of removal’ which is very well covered under definition of input service and accordingly the Cenvat credit of Service Tax paid for such GTA service is admissible.

Prepared By:-Neelam Jain

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PJ/CASE LAW/2016-17/3119

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