CASE STUDY

Prepared By:
CA Pradeep Jain,
Sukhvinder Kaur, LLB [FYIC]
And Kavita Thanvi

Introduction: -
 
Generally, the place of removal is the factory gate of the premises of the assessee. However, this is not the case always. In case the agreement is FOR destination based between the assessee and the buyer or exporter of goods, whether the place of removal will extend upto doorstep of the buyer or the port of export. In case of delivery of goods at the doorstep of the buyer, the credit of outward freight has been held admissible to the supplier on the fulfillment of conditions specified in Board Circular No. 91/8/2007-St dated 23.08.2007. However, in case of export of goods where the exporter-assessee bears the cost of post removal services like CHA, Outward Transportation, terminal handling services and pays service tax also, whether the service tax paid on these services will be available to the assessee as credit. This is the issue raised in the case under study. 

M/s Kansara Modler Ltd v/s Deputy Commissioner, Central Excise Division, Jodhpur
[Order-In-Appeal no. 134(CB)CE/JPR-II/2011, Dated: 09.06.2011]

Brief facts of the case: -
 
-  Appellant-assessee is engaged in manufacture of Taper Rollers for bearings falling under Chapter sub-heading 84829130 of the first Schedule of the Central Excise Tariff Act, 1985. During the audit for the period from 01.04.2007 to 31.03.2010, appellant availed cenvat credit of service tax on CHA services, the outward transportation services (freight on the transportation of goods from ICD to port of export) and Terminal Handling Charges.
 
- Department issued show cause notice to the appellant alleging that the credit on the said services was not available to them as these services do not fall in the purview of definition of “input services” under Rule 2 (l) of the Cenvat Credit Rules, 2004.
 
- The Adjudicating Authority denied the cenvat credit of service tax on the said services to the appellant ground that the impugned services were post removal services therefore not covered under the definition of input services as defined under Rule 2(1) of the Cenvat Credit Rules, 2004, and accordingly confirmed the demand along with interest under Rule 14 of the Cenvat Credit Rules, 2004 read with Section 11A (1) and 11(B) of the Central Excise Act, 1944. The Adjudicating Authority also imposed equal penalty under Rule 15(2) of the Cenvat Credit Rules, 2004 read with Section 11AC of the Central Excise Act, 1944.
 
- Aggrieved by the impugned order, appellant filed appeal before the Commissioner (Appeal).
 
Appellant’s Contentions: -
 
Before the Commissioner (Appeal), the appellant raised following contentions:
 
- Appellant submit that there is  no doubt regarding the fact that the definition of input services is inclusive as it covers a no. of services like accounting auditing, credit rating, share registry, coaching and training, etc. which have no connection with the place of removal. These services are availed outside the factory at some other place, but credit is allowed on the same. As such, the appellant is very correct in contending that the no. of services are included and can be included in the list of services specified in the definition of input services.
 
- With regard to finding of the impugned order that even if appellant’s contention (that place of removal is port of export) is accepted, then too, the port of export is the ICD, Jodhpur and the same will be the place of removal, it was submitted that the appellant have from the beginning said that the credit is available for the services that are availed upto the place of removal. The definition of the input service specifies that the services availed “upto the place of removal” are includible in this definition. It was submitted that said words have not been defined under the Rule but have been defined in section 4(i)(c) of the Central Excise Act, 1944.
 
Relying upon the definition of “place of removal” in the Act, it was submitted that analysis of this definition of place of removal makes it clear that the clause (i) is the general clause which says normally the factory will be the place of removal. However, clause (iii) states or any other place or premises from where the excisable goods are to be sold after their clearance from the factory, i.e., in the case where the actual sale take place after clearance of the goods from the factory, place of removal will be that place. In other words, place of removal will be the place of actual sale, where the risks and rewards pertaining to the goods are transferred to the buyer. As such, in case of exports where the sale is at FOR basis, property in the goods is transferred to the buyer at port of export only. This word “port of export” in general parlance means the place from where the EXPORT takes place.
 
Relying upon the definition of word ‘export’ in Section 2(18) of the Customs Act, 1962 it was submitted that thus, export means taking out of India, or we can say export takes place when the goods leave the custom frontiers of India. This occurs at the port from where the goods are loaded for export. This place is only a sea port from where the goods leave India.
 
- Appellant also referred to meaning of the words “port of export” in the Business Dictionary and submitted that the port of export will be that place where the goods are left for the foreign country. But the department is contending that the goods are exported from the ICD, Jodhpur. Thus, the ICD is only an intermediate port and actual export take place at the sea port only. This is further clarified by the fact that the risk and rewards pertaining to the export goods remain with the exporter till the goods are loaded in the vessel for being exported. After this, if any loss occurs, the risk is transferred to the importer/buyer of the goods. Therefore, the impugned order is wrongly alleging that the port of export is the ICD, Jodhpur and credit of services availed after this will not be allowed.
 
- Further, Section 5 of the Central Sales Tax Act also clarifies that in the case of export and import the sale or purchase of goods shall be deemed to take place in the following manner:-
 
“when is a sale or purchase of goods said to take place in the course of import or export- (A) a sale or purchase of goods shall be deemed to take place in the course of export of the goods out of the territory of India only if the sale or purchase either occasions such export or is effected by a transfer of documents of title to the goods after the goods have crossed the Customs frontiers of India.”
 
This means, in respect of export goods, place of removal is the place where the documents are presented to the Customs officers for export and not the factory gate. All this was discussed in detail in the reply to the show cause notice but the adjudicating authority has not distinguished the submission made by the appellant. It has been held by hon’ble Supreme Court in the case of State of Himachal Pradesh Vs Sardara Singh [2008-TIOL-160-SC-NDPS] that an order passed without assigning reasons (as to why the submissions of the appellant have not been accepted) is void and null.
 
- It was submitted that the impugned order-in-original is alleging that the appellant have wrongly relied upon the decision of M/S Kuntal Granite Ltd. v/s Commissioner of C. Excise, Banglore [2007(215) E.L.T 515 (Tri. Bang)]wherein it is held that the port will be the place of removal in case of export. Since the port is the place of removal in case of export, all the services availed upto the port will be included in the definition of input services. The impugned order is contending that this decision is not applicable in them as it was distinguished in the case of Nirma Ltd. Vs. CCE, Bhavnagar [2009(13)STR64(Tri-Ahm)]. In this regard, it is submitted that the credit has been allowed on CHA services in the following case saying that the port is the place of removal in case of export:-
 
M/s Leela Scottish Lace Pvt Ltd Vs CC, Bangalore [2010-TIOL-721-CESTAT-BANG]:-
 
This decision is the recent decision wherein credit has been allowed on CHA services. Similar decisions were cited in the reply to show cause notice which are listed as follows:-
 
- Commissioner of C. Ex., Rajkot vs Adani Pharmachem P. Ltd. [2008 (12) S.T.R. 593 (Tri. - Ahmd.)]
- CCE, Ahmedabad Vs M/s ADF Foods Ltd [2009-TIOL-1363-CESTAT-AHM]
- M/s Rawmin Mining and Industries Ltd Vs CCE, Bhavnagar-I [2008-TIOL-1997-CESTAT-AHM]
- CCE, Rajkot vs. M/s Rolex Rings Pvt. Ltd. [2008-TIOL-383-CESTAT-AHM]
 
In these decisions Cenvat Credit has been allowed on the post removal expenses. The analogy on which the credit is allowed is that the value of post removal expenses is considered while determining the F.O.B. value of the export goods.As the appellant is also an exporter and have availed credit on post removal expenses which is allowed as per aforesaid decisions. All these decisions were discussed in the reply to the show cause notice also. But the learned Adjudicating Authority has passed the order without distinguishing the above cases. Such an order passed without discussing the case laws submitted by the appellant is not tenable in the eyes of law. In support of their contention reliance was placed on judgment in the case of Commissioner of Central Excise, Bangalore versus Srikumar Agencies [2008 (232) E.L.T. 577 (S.C.)]that an order passed without considering the submissions of the appellant is a non speaking order and a non speaking order is not legally viable in the eyes of law. It was submitted that since the impugned order has been passed by not discussing the decisions submitted by the appellant, it is a non speaking order which is not justified and is liable to be set aside.
 
- Appellant submitted that they have cited the decisions of Tribunal in favour of their contention that port is the place of removal in case of export. On the other hand, the adjudicating authority has also cited a contradictory decision denying the above contention of appellant. The decision of Nirma Ltd. is also a decision given by the Tribunal. Thus, there are contradictory decisions available on the issue. It has been held in a no. of cases that where there are contradictory decisions on a particular issue, the one favouring the assessee will prevail. It has been held in the following cases:-
 
a)                  CCE, Jamshedpur v/s Tata Iron & Steel Co. Ltd. [1999 (114) ELT 160 (Tri-Kolkata)]
 
b)                  CCE, Trichy v/s Dalmia Cements (P) Ltd. [1999 (114) ELT 836 (Tri-Madras)]
 
c)                   Crompton Greaves Ltd. v/s CCE, Mumbai-II [1997 (94) ELT 629 (Tri.-Mumbai)]
 
d)                  Hoolidevi v/s Asst. Collector of Customs (P), Madras [1995 (78) ELT 669 (Mad.)]
 
As such, where there are contradictory decisions, one favouring the assessees will be considered. In their case also, there are contradictory decisions given by various appellate authorities, the decisions in their favour will prevail. Therefore, extending the ratio of these decisions to them, the impugned order should be quashed and the appeal should be allowed.
 
- In continuation to the list of cases wherein credit has been allowed on post removal expenses, certain other decisions on which reliance was placed are as under: –
 
JK TYRE & INDUSTRIES LTD. Versus COMMISSIONER OF C. EX., MYSORE [2010 (18) S.T.R. 637 (Tri. - Bang.)]
 
COMMISSIONER OF C. EX., SURAT Versus COLOUR SYNTH INDUSTRIES P. LTD. [2009 (14) S.T.R. 309 (Tri. - Ahmd.)]
 
Thus, extending the ratio of above decisions, the credit should be allowed to the appellant and the impugned order should be set aside.
 
- Further the Larger bench of Bangalore Tribunal has interpreted the definition of input services and had allowed the credit on outward transportation services in the case of ABB LTD Vs CCE & ST, Bangalore [2009-TIOL-830-CESTAT-BANG-LB.]. This decision was discussed in the reply to show cause notice. But the impugned order has denied the applicability of this decision by saying that this decision has been stayed by the Hon’ble Karnataka High Court. However, recently it is held in the case of MODERN PETROFILS Versus COMMR. OF C. EX., VADODARA [2010 (253) E.L.T. 609 (Tri. - Ahmd.)] that the stay order does not alter the validity of a decision. It is only the final order which has precedence over the lower formations. Thus, the above decision has been delivered in context of the stay order given in the case of ABB Ltd. by hon’ble High Court. Therefore, the denial of applicability of the decision of larger bench is not justified on the grounds that stay has been granted.
 
- Further the adjudicating authority has been passed saying that the assessee’s contention is not agreeable that expenses have been included in the value. In support of this non-agreement, the impugned order is relying upon the decision of hon’ble Supreme Court in the case of Maruti Suzuki Ltd. v/s CCE, Delhi-III [2009(15)ELT515(T)] wherein it has been held that even if the value is included in the assessable value of final product it will not entitle the manufacturer to take credit. In this regard it is submitted that this decision was rendered by hon’ble Supreme Court in context of the ‘inputs’. It is worthwhile to notice here that there is vital difference between the definitions of the inputs and input services. The definition of the input service as given in rule 2(l) of the Cenvat Credit Rules, 2004 has an inclusive clause therein whereas there is no such clause in the definition of the inputs as given in rule 2(k) of the Cenvat Credit Rules, 2004. The word “includes” in the definition of the input services indicates that a lot more can be added to the list of services specified after the word “includes”. Reliance was placed on judgment given in the case of Regional Director V/s High Land Coffee Works [1991 (3) SCC 617] and it was submiited that it is clear from the above judgment that by use of the word "includes", services which may otherwise have not come within the ambit of the definition clause are included therein. On the other hand, there is no such clause in the definition of inputs due to which nothing more can be added to whatever is written therein.
 
The judgment given in the case of Maruti Suzuki as relied by the learned adjudicating officer was given in context of the inputs whose definition is exhaustive whereas the case of appellant pertains to input services whose definition has inclusive clause. Thus, the reliance placed by the learned adjudicating officer is not tenable and is liable to be quashed.
 
In continuation to above, it is submitted that the above referred decision of Maruti Suzuki was delivered in context of inputs and it cannot be taken up for input services. This analogy has been supported by the hon’ble Mumbai Tribunal in the decision given in M/s ISMT Ltd Vs CCE & CC, Aurangabad [2010-TIOL-27-CESTAT-MUM].
 
Furthermore, the same analogy has been underlined by Mumbai High Court in case of Ultratech Cement. Therefore, the above decisions also say that the decision given for the inputs cannot be made applicable to the input services.
 
- Further, it is submitted that the decision of Maruti Suzuki is also not final and it has been referred to larger bench of Apex Court. However, it has not impact on this case as already said, the above decision was related to inputs and in instant case, the issue is related to input services.
 
- Further the order in original has not relied upon the decision submitted by the appellant in the case of M/s Lucid Colloids Ltd., Jodhpur, wherein the hon’ble Commissioner Appeal has allowed the credit on port charges. The impugned order has been passed in contradiction to this order. The department has not gone in appeal against this order. Thus, this order has attained finality and has become binding on the department. It has been held in the case of Lumax Samlip Industries that once the order has become final, it is binding on the department and department cannot take stand contrary to that decision. This decision was cited asCommissioner of Service Tax, Chennai versus Lumax Samlip Industries [2007 (6) S.T.R. 411 (Tri. - Chennai)]. This decision was confirmed by hon’ble Madras High Court which was reported at 2007 (8) S.T.R. 113 (Mad.). This decision is also affirmed by the highest court of India and was reported at 2008 (11) STR J34 (Supreme Court).  The ratio of the above case should be applied in their case also and the benefit of above decision should be granted to them and the impugned order should be set aside. 
 
- Further the order in original has been passed referring the decision of CCE, Shillong v/s Guwahati Carbon Ltd. [2009(243) ELT 307 (Tribunal)] saying that the customers place cannot be treated as place of goods of removal. To this the appellant contends that they have never treated the customers place as port of export. The port of export is not the customers place. The place where the goods are to be exported is the customers place. So this is totally wrong to say that the appellant is treating the buyers place as the port of export. Therefore the order in original passed against the appellant is totally erroneous and is liable to be set aside.
 
- Further the order in original has been passed relying the decision of Gujarat Ambuja Cements Ltd. Vs. CCE Ludhiana [2007 (6) S.T.R. 249 (Tri. –Del.) but the same has been overruled by the Punjab & Haryana High Court. So the department saying that the Cenvat credit is not admissible as per these decisions is totally erroneous. Further the order in original also mentions the decision of CCE, Indore v/s NHK Spring (India) Ltd. But as the decision is given on the basis of Ambuja Cement Tribunal’s decision which itself has been reversed in the High court. Therefore the order in original passed by relying on these decisions, is totally erroneous and is liable to be set aside.
 
- Appellant further submitted that the Board has clarified that the credit of outward transportation is allowed if certain conditions are satisfied. This clarification has been given vide the Board Circular no. 97/8/2007-S.T., dated 23-8-2007. The three conditions specified in this circular were satisfied by the appellant and the copy of insurance cover was enclosed with the reply to show cause notice to support this contention. But the benefit of this circular has not been extended to them and instead of it, it is alleged that this circular itself relies upon the decision of Gujarat Ambuja Cements Ltd. wherein credit was denied on the expenses incurred after place of removal. In this regard, it is submitted that the decision of Gujarat Ambuja has already been reversed by the hon’ble High Court as discussed in the forgoing paras, thus this contention of learned Deputy Commissioner is not tenable. Further, it is alleged that the the contention of the appellant (that the credit will be allowed if they able to prove that the transfer of property in goods occur at the said place) is also of not much help. In this respect, it is submitted that the order does not bring out how this contention of the appellant is not of much help. Merely by alleging that the contention of the appellant is not tenable is not sufficient and the allegations are required to be proved before confirming the demand. In other words the reasons should be specified as to why the contentions of the appellant have not been accepted. In this regard, reliance was placed on the judgment of the Apex Courtin the case of State of Himachal Pradesh Vs Sardara Singh [2008-TIOL-160-SC-NDPS].
 
The analysis of this decision makes it clear that the order passed without giving reasons of decision is not justified in the eyes of law. On the other hand, the appellant had satisfied all the three conditions specified in the circular and the same was submitted in the reply to show cause notice and the insurance cover note was attached to the reply in this regard. But the submissions made by them in this regard are not accepted. Neither any finding has been given regarding the three conditions duly satisfied by them nor, the benefit of this circular has been extended to them. Then on what grounds it is alleged that the reliance placed on this circular is not of much help to them, it is not understandable. Thus, the order in original so long as it is silent about the three conditions as satisfied by the appellant is a non speaking order. In a recent decision in the case of The Commissioner of Central Excise Vs. M/S Cable Corporation of India [2010-TIOL-607-HC-MUM-CX]  it is said that while deciding the case court is under an obligation to record reasons, however, brief, the same may be as it is a requirement of principles of natural justice. Non observance of the said principles would vitiate the judicial order. Thus the order passed is non speaking and is liable to be quashed.
 
-  In continuation to above it is submitted that in the light of above referred circular the benefit of credit was supposed to be allowed to them as the circulars are binding on the department. It has been held in the case of Collector of Central Excise, Vadodara vs Dhiren Chemical Industries [2002 (139) ELT 3 (SC)] that the order passed by the Revenue in contravention to the clarifications given by the Board is void ab initio. This was discussed in the reply to show cause notice but the submissions of the appellant were not considered. The decision submitted by the appellant was not discussed by the Adjudicating Authority while passing the order in original. Further, to support this contention they rely on the case of WIPRO COMPUTERS LTD. Versus COMMISSIONER OF CUSTOMS, CHENNAI [2001 (135) E.L.T. 450 (Tri. - Chennai)] wherein the Tribunal held “An order not discussing evidence submitted by assessee nor technical literature or trade opinion a non-speaking order and not a legal.
 
Further the decision that is relied by the Adjudicating Authority while passing the order also says the circulars issued by the CBEC are binding for the department. In this regard, reliance is placed on AMBUJA CEMENTS LTD. Versus UNION OF INDIA [2009 (236) E.L.T. 431 (P & H)]and it is submitted that it is clear that the order passed without considering the Board Circulars is not tenable in the eyes of law. Since the appellant have duly satisfied the conditions laid down in circular no. 97/8/2007, the credit of expenses in question was supposed to be allowed to them as prescribed in this circular. But this circular has not been considered while denying the credit to the appellant. Thus, the order passed in contradiction to this circular is not tenable as per above referred decision and is liable to be set aside.
 
- The order in original has been passed discussing a great portion of Sale of Goods Act, 1930. The circular mentioned by the appellant has only a condition referring Sales of Goods Act. The circular does not deal with Sale of Goods Act. The order in original passed submitting a big discussion on sale of goods act is diverting the subject. Therefore shifting the whole matter to Sale of goods act is not justified. Further, the impugned order is alleging that the seller (i.e. the appellant) has transferred the property in goods to the buyer at the factory gate, so the credit of expenses incurred after factory gate is not allowed to them. In this regard, it is submitted that the “transfer of property” in goods means that all the risks and rewards pertaining to the goods have been transferred. In other words, if the property in goods has been transferred from seller to buyer at factory gate, the loss occurring in transit will be born by the buyer. In other words, even if the goods damage in transit, the buyer is obliged to take the delivery. This is not the case here. The loss pertaining to the goods remain with the appellant (seller) till the goods reaches port. It is also clear by the fact that the insurance has been done by the seller as the insurance receipt was enclosed with the reply to show cause notice. This means, if any loss occurs during transit and the goods get damaged, the buyer may refuse to take the delievery. Thus, the risk of loss during the transit remains with the appellant who is the seller. Therefore, the essence of transfer of property is the transfer of risk and rewards. But the risk and rewards pertaining to the goods are not transferred to the buyer till the goods reach the port. Therefore, the contention of the impugned order that the property in goods is transferred to the buyer at the factory gate is not viable and is liable to be set aside. Therefore the order in original passed against the appellant is totally erroneous and is liable to be set aside.
 
- The appellant further submitted that by following the above referred Circular, various appellate authorities have allowed credit on the post removal expenses, viz outward transportation. Even the hon’ble Punjab and Haryana High Court has allowed the credit on outward transportation in the case of Ambuja Cements Ltd Vs UoI [2009-TIOL-110-HC-P&H-ST]. Thus, credit on outward freight and other such expenses is allowed. Reliance also placed on following decisions-
 
L G Electronics (India) Pvt Ltd Vs CCE, Noida [2010-TIOL-1048-CESTAT-DEL]
 
M/s Visaka Industries Ltd Vs CC & CCE, Nagpur [2009-TIOL-1903-CESTAT-MUM]
 
CCE, Allahabad Vs Modern Laminators Ltd [2009-TIOL-1519-CESTAT-DEL ]
 
M/s Bharat Alloys & Energy Ltd, Kurnool Vs CC & CCE, Tirupathi [2009-TIOL-2107-CESTAT-BANG]
 
In the above decisions the credit was allowed on the outward transportation which is also a post removal expense. Thus, applying the ratio of above referred decisions, the credit should be allowed to us and the impugned show cause notice should be set aside. 
 
All these cases were also discussed with the reply to the show cause notice but the order was passed without discussing all these case laws. It was recently held in M/s Nisha Cements Vs. CCE, Calicut [2010-TIOL-1255-CESTAT- BANG] Order passed by lower Appellate Authority confirming duty demand by neither addressing various grounds raised by assessee nor discussing case law cited and without giving proper findings thereon, not sustainable. Other decisions are-
 
- CAUVERY STONES IMPEX PRIVATE LTD. Versus COMMISSIONER OF C. EX., SALEM [2010 (257) E.L.T. 151 (Tri. - Chennai)]
 
COMMISSIONER OF C. EX., AHMEDABAD Versus FINE CARE BIOSYSTEMS [2009 (244) E.L.T. 372 (Tri. - Ahmd.)]
 
- The order in original has been passed saying that the appellant has just produced a para of circular which allows credit of GTA as output service. The appellant has produced other decisions also wherein credit for other services is also allowed. Further there are decisions also where credit is allowed-
 
COMMISSIONER OF C. EX., RAIPUR Versus BEEKAY ENGG. & CASTINGS LTD. [2009 (16) S.T.R. 709 (Tri. - Del.)]
 
COMMISSIONER OF CENTRAL EXCISE, VAPI Versus NILKAMAL CRATES & BINS [2010 (19) S.T.R. 431 (Tri. - Ahmd.)]
 
Further in a recent decision in the case ofM/s Aranthangi Chemicals Pvt. Ltd. CCE, Trichy [2010-TIOL-1420-CESTAT-MAD],the credit has been allowed on the CHA services which are also availed after the goods have left the factory of the seller.
 
Therefore as said by the order in original in order the appellant has no intentions of misleading the department by referring the circular. As there are various other decisions, referred above wherein the credit of services used in relation to export is available. Therefore the order in original passed against the appellant is totally erroneous and is liable to be set aside.
 
- Further the order in original has been passed saying that the sale of goods when has taken place at the factory gate the other expenses incurred after that are not allowed. But the sale has not completed at the factory gate nor has the liability of the exporter ended at the factory gate. If it would have been the position the risk of loss in transit till port of export would have been born by the buyer/importer. Then, there would not have been any case of rejection of the export consignment as the ‘owner’ is always responsible for damage of goods. But this is not the case here. All the risk and rewards pertaining to the goods is born by the seller till the goods reaches the port. Further, if the goods are found defective, these can be returned to the seller and, the seller, i.e. the appellant is bound to replace them or remove the defects. Therefore, the contention of the impugned order that the property in goods is transferred at factory gate is not tenable. The order in original passed disallowing the credit should be set aside allowing the appeal.
 
- The appellant further submit that the impugned order is again referring the decisions of Gujarat Ambuja and NHK Springs wherein the credit has been denied on the services in question. In this regard, it is reiterated that the decisions have been over-ruled by the Hon’ble High Court which has allowed the credit on such expenses. It is further alleged that the port of export is the ICD, Jodhpur, as such credit availed in respect of services received after this will not be allowed. This issue has been discussed in depth in the forgoing paras wherein it is proved that the port of export is the place from where the goods left the Indian territories. Thus, the port of export is the sea port where the cargo is loaded for sea journey. Therefore, the contention of impugned order is not tenable and is liable to be set aside.
 
- The appellant submit that the impugned order is saying that the property and possession are not synonymous. It is further alleged that after the goods are removed from factory, the possession remain with the seller but the property has been transferred to the buyer. In this respect it is submitted that the transfer of possession means the physical delivery where as the transfer of property means the risks and rewards pertaining to the goods have been transferred. In the instant case, the property in goods remains with the seller till the goods are loaded for shipment. If any loss occurs to the goods at any place after the goods are removed from the factory and before the cargo is loaded for shipment, it is to be born by the seller. Buyer is not responsible for the same. This proves that the property in goods remains with the seller, i.e. the appellant till the goods are loaded for shipment. Therefore, the contention of the impugned order that the property in goods is transferred to the buyer at factory gate is not tenable and is liable to be set aside. The appeal should therefore be allowed.
 
-  Further the order in original has been passed by saying that time of removal shall be deemed to be the time when goods are cleared from the factory. The time of removal is for the levy of excise duty and has nothing to do with the expenses upto the place of removal. The time has been given in the Act so there can be symmetry for levy of excise duty. But as there cannot always be factory gate as the place of removal therefore the place of removal is defined in the Act. So the time of removal being the factory gate does not effect the credit of services taken upto the place of removal. It is further alleged by the learned deputy commissioner at page no. 9 of the impugned order that “the place of removal is the place from where excisable goods are removed. It may be a factory or a warehouse or a depot.” In this respect it is submitted that the learned Deputy Commissioner has taken up incomplete phrase from the definition of theplace of removal. The place of removal as defined in section 4(i)(c) of the Central Excise Act, 1944 says that place of removal may be 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 clearance from the factory; from where such goods are removed. Thus, the place of removal can also be a place other than factory gate, depot or premises of a consignment agent. It will always be the place where the goods are actually “sold”, i.e., where the transfer of property in goods takes place. In the instant case, the risk and rewards relating to the goods are transferred at the port of export where the cargo is loaded for shipment. Thus, the place of removal will be the port of export and therefore, the expenses incurred upto this place will be allowed as credit irrespective of the time of removal which has nothing to do with the transfer of property in goods. Therefore, the order based upon the wrong interpretations of the provisions of law is not sustainable and is liable to be set aside.
 
- The appellant further submit that the impugned order is relying upon the decision of M/s Escorts JCB Ltd., v/s CCE, Delhi-II [2002(146)ELT31(SC)] wherein the goods were found to be delivered to buyer and the property and possession was passed on to the buyer when the goods were handed over to the transporter. It is alleged that this is a Supreme Court decision which has precedence over the decision of hon’ble Punjab and Haryana High Court in the case of Ambuja Cement Ltd. v/s Union of India [2009(14)STR3(P&H)] as relied upon by the appellant. In this regard it is submitted that the reliance placed upon the decision of Escorts JCB Ltd. is erroneous as the facts and circumstances under which this decision was delivered are entirely different from that of the case of appellant. This will be clarified by the analysis of this decision of hon’ble Supreme Court. In this case, the assessee (M/s Escorts) was issued a show cause notice to recover the excise duty on the value of freight and transit insurance holding a view that the sale has taken place at buyer’s door step as these expenses were born by the assessee and recovered from their customers and not included in the assessable value of the goods. But the assessee pleaded that the sale is completed at their factory gate as the agreement of sale provided that the sale will be deemed to be taken place at the factory gate of M/s Escorts and all the risks and rewards pertaining to the goods will be transferred to the buyer there only. Thus, the agreement of sale provides that the risks and rewards pertaining to the goods will be transferred to the buyer at factory gate only. For clarifying this fact, an extract from this decision is produced as follows:-
 
“………Our attention has been drawn to various clauses of the terms and conditions of sale which has been placed on record as Annexure P-1 indicating that the prices are "ex-works" at Ballabgarh exclusive of freight, insurance, octroi etc. The first clause under the heading `Terms of Payment' shows that 30% of the quoted price is payable in advance alongwith the order and the balance amount against delivery Ex-works Ballabgarh. The next clause under the heading "Delivery" provides that all deliveries are Ex-works Ballabgarh, Haryana. Under the heading `Transit Risk and Insurance' it is indicated that risk of the goods will be that of the buyer from the time Escorts JCB Ltd. hands over the equipment to the buyer's representative or carrier or from the time goods leave Escorts JCB Ltd. premises……...”
 
Thus, in the case of M/s Escorts, the terms and conditions of the sale deed specifically provided that the risk pertaining to the goods will be transferred to the buyer at the factory gate of M/s Escorts. Therefore, if any loss occurs during transit, there will be no liability of the seller. In the case of appellant, there is no such clause in the sale deed. The risk pertaining to the goods is that of the seller only till the cargo is loaded for shipment at the sea port. Till this time, all the risks pertaining to the goods are of the seller, i.e. the appellant. Thus, the facts and circumstances of the Escorts case as decided by the hon’ble Supreme Court are entirely different than the case of appellant. Therefore, this decision is not applicable on them and in their case the decision of Ambuja Cement as held by the hon’ble Punjab and Haryana High Court will have precedence. Therefore, the reliance placed by the learned adjudicating officer on the decision of Escorts Ltd. is not justified and thus, the impugned order is liable to be quashed and the appeal should be allowed.
 
- The impugned order is alleging that the contention of the appellant that in case of FOR sales the place of removal will be customer’s place is not sustainable in the light of decision of M/s Banswara Syntex Ltd. and M/s National Tools wherein it is held that the FOB value cannot be taken as transaction value. It is further alleged that for arriving at the transaction value, the post removal expenses are to be deducted from FOB value and for the export goods, the factory gate is the place of removal. In this regard, it is submitted that the FOB value can also be equal to the assessable value. It need not be always more than the assessable value as contended by the learned Deputy Commissioner. In this regard, the appellant would like to submit the extract from the supplementary instructions which say that the assessable value can be equal to or more or less than the FOB value of the goods. This clarification is given in Chapter 7 of the Supplementary Instructions issued by the CBEC. The relevant Para 7.1 was referred and it was submitted thatthe FOB value and transaction value can also be equal to each other. Therefore, the contention of the impugned order that the FOB value cannot be treated as transaction value is not legally sustainable and is liable to be set aside. The supplementary instructions clarify that the assessable value can also be FOB value if the risk and rewards pertaining to the export goods are transferred at the port of export. This is happening in the instant case. Therefore, the place of removal will be port of export and all the expenses incurred by the appellant till this place have since formed part of assessable value, so credit in respect of these expenses is duly available to them. The impugned order is thus, liable to be set aside.
 
- The appellant further submit that the impugned order is again citing certain Tribunal decisions like CCE, Shilong v/s Guwahati Carbon Ltd., India Japan Lighting Pvt. Ltd. v/s CCE, Chennai, Ambuja Cement Ltd., M/s Ultratech Cements Ltd., Excel Crop Care v. CCE, etc. wherein credit on expenses in appeal have been denied. The reason for denial of credit has been decided that customer’s place cannot be held to be a place of removal. In this regard, it is submitted that these are tribunal decisions wherein credit on impugned services have been denied whereas the appellant have cited decision of hon’ble Punjab and Haryana High Court in the case of M/s Ambuja Cements Ltd. wherein credit has been allowed on the expenses incurred after the factory gate. This decision has precedence over the decision of Tribunal and it was supposed to be considered while deciding the issue and the credit was to be allowed to the appellant. But this has not been done. Even if it is accepted for the sake of argument also that this decision is not acceptable then too the appellant have cited a series of Tribunal decisions in the reply to show cause notice wherein credit was allowed on such expenses. But their benefit has also not been allowed. Indeed, certain contradictory decisions have been cited in the impugned order in which the credit has been denied on such services. It has already been discussed in the forgoing paras that in case of contradictory decisions, the decisions favouring the assessee will be considered. A number of case laws have been referred in this regard. Therefore, the cases relied by the learned deputy commissioner are not applicable and the credit should be allowed to the appellant by quashing the impugned order. 
 
- The appellant submit that extended period can be invoked only in case of any fraud or willful suppression of facts. It is submitted that neither there is any requirement of submitting the names of services on which credit is taken nor there is any requirement of mentioning their description in the ER 1. Nothing contained in the Central Excise Act, 1944 or rules framed there under states that one has to furnish the description and copies of invoices and use of services on which Cenvat Credit is taken. Due to this these details were not mentioned in the return. The order in original again saying that the facts were not disclosed to the department is totally wrong. When there was no column for the details then where could the appellant tell the facts. This cannot be treated as suppression of facts as non-filing of information which is not required under law does not amount to suppression. Had there been any such provision in the law regarding the furnishing of these details in the ER 1 and they have not provided the same; then it would have amounted to suppression. Further, we are furnishing all the required returns in the prescribed format to the department within due date and have provided all the details as and when required by the department. Moreover, all of their records were available for checking by the department. The appellant had made available all the documents to the audit party and if there was any ill intention, the records would not have been given or incomplete records would have been given to the audit party. All this makes it clear that we did not hide anything from the department and have acted within the boundaries of law. As such, the extended period invoked by the department is not legally sustainable.  Further the same was also discussed in the reply to the show cause notice but while passing the order these submissions were not considered. In a decision recently given by the hon’ble Gujarat High Court in the case of CC Vs Essar Oil Limited [2010-TIOL-560-HC-AHM-CUS]
 
“CESTAT is required to pass reasoned speaking orders - while setting aside the order of the Commissioner the Tribunal has not recorded any finding as to in what manner the findings recorded by Commissioner are erroneous or as to why it was required to take a different view.
 
In their case also, our submissions were not discussed. The impugned order simply rejected the Cenvat credit by narrating what was given in the show cause notice. Our submissions have not been discussed.
 
- The appellant submit that the order in original has placed reliance on the decision of GREY NODULES PRECICAST PVT. LTD. Versus COMMR. OF C. EX., AHMEDABAD-II [2009 (236) E.L.T. 54 (Tri. - Ahmd.)] for alleging the wilful suppression. They strongly rebut the applicability of the same here. In this case, the assessee had collected the amount from the customers that was supposed to form the part of assessable value. But against that they have raised the commercial invoice. To evade the payment of duty, the invoice had no mention of developing and designing charges. Here neither there was such intention of the appellant, nor any commercial bill, was raised by them. If they had any such intention, they would not have valued the goods according to Section 4 of the Central Excise Act, 1944. Since the valuation of goods on which duty is paid is in accordance with the provisions of the Act, there is no case of willful suppression. Therefore, the credit cannot be the expenses incurred for the same should be allowed to them. Thus, the contention of impugned order is not justified and is liable to be set aside.
 
- It is further submitted that in the impugned order it has been held that the judgment given in Commissioner of Central Excise, Trichy v/s Grasim Industries Ltd. [2005 (183) E.L.T. 123 (S.C.)] which was relied upon by the appellant was of no help to them as the said case was distinguished by the Hon’ble Supreme Court in the case of Nirlex Spares Pvt Ltd v/s CCE [2008 (222) ELT 3 (SC)]. In this regard the appellant submits that the judgment of Grasim Industries was distinguished in the Nirlex Spares Pvt Ltd on the facts of the case and not on the issue of imposition of penalty. Thus, the said judgment of Grasim Industries is applicable to the appellants as far as issue of penalty is concerned and the benefit of the said judgment should be extended to them. Thus, the impugned order-in-original is required to be set aside.
 
- The appellant submit that the impugned order is relying upon the decision of CCE, Jalandhar v/s Vardhman India Products wherein it is held that wrongly availed Modvat credit amounts to evasion of duty. In this regard it is submitted that they have rightfully availed credit on the basis of no. of decisions of tribunal and Hon’ble High Court. Therefore, there is no irregular availment of credit and thus, the decision cited by the learned deputy commissioner is not applicable on them.
 
- The appellant further submit that the learned Deputy Commissioner has relied upon the case of Mewar Polytex Ltd v/s UOI [2009 (236) ELT 448 (Raj)] wherein the penalty for irregular availment of cenvat credit was upheld. In this regard the appellant submit that this is not case of irregular availment of cenvat credit. The appellant has taken exactly the cenvat credit of the duty by relying upon the various judgments. The impugned order has failed to prove why the judgments relied upon by the appellant for taking the Cenvat Credit are not applicable to them. As such, the allegation of irregular availment of Cenvat Credit has not been proved while on the other hand the appellant had bonafide belief regarding availment of credit backed by a no. of judgments. Therefore, there was no irregular availment of Cenvat Credit and as such, the decision cited by the learned Deputy Commissioner is not applicable on them.
 
- The appellant further submit that the learned Deputy Commissioner has wrongly held that penalty was imposed on the appellant in light of judgment of the Supreme Court in the case of Union of India v/s Dharmendra Textile Processors [2008 (231) ELT 3 (SC)] wherein it was held that mens rea is not essential for imposing penalty in civil cases. In this regard it is submitted that for imposing the penalty equivalent to the duty demanded under Section 11AC, it is required to be proved that there was willful suppression of facts by fraud, mis-statement with intent to evade payment of duty. The suppression/willful concealment of facts is necessary if the penalty under this section is required to be imposed as stated by the language of this section. Section 11AC was referred and it was submitted that as such, as per language of this section, penalty can be imposed only if the short-payment is due to any of the above referred ingredients. As such, the judgment of the hon’ble Supreme Court has been delivered by ignoring the provisions of this section. It has been held in the case of A-One Granites v State of U.P. (2001)3SCC537; AIR2001 SC 1203; Salmond on Jurisprudence, 12th Edn. Pg 167 that the decision given by the hon’ble Apex Court which has been rendered per incuriam, i.e. by ignoring the provisions of the Act, is not binding under article 141 of the Constitution. The doctrine of per incuriam is an exception of the rule of precedents and it says that any expression resulting from ignorance is not a binding authority and it may be ignored. In the instant case, the mens rea/willful suppression has been mentioned as essential ingredients for the purpose of imposing the penalty u/s 11AC as contemplated by the provisions of the Central Excise Act, 1944. But the hon’ble Supreme Court has rendered decision of Dharmendra Textiles by ignoring this vital fact. As such, it is not binding precedent as per doctrine of per incuriam. In the instant case, there was no willful suppression by the appellant but this is a simple case of taking the cenvat credit of duty as charged in the invoice of the supplier and borne by them. As such, the penalty cannot be imposed upon them by relying on the case of Dharmendra Textiles. As such, the impugned order is not tenable and it should be set aside.     
 
- The appellant further submit that for invoking the extended period of limitation, the department should present something positive rather than mere inaction or failure on part of assessee. This has been held in the case of Chemphar Drug & Limits reported in ( 2002-TIOL-266-SC- CX). Thus, in the light of above decision, extended period cannot be invoked blindly in every case. Where the assessees have been acting in the boundaries of law, the extended period cannot be invoked. Similar decision is given in the following cases:-
 
Pushpam Pharmaceuticals Company Vs. CCE, Mumbai reported in (2002-TIOL-235-SC- CX )-
 
M/s Idea Cellular Ltd Vs CCE, Rohtak [2009-TIOL-387-CESTAT-DEL]-
 
In the above cases it was held that mere inaction would not be a valid ground for invoking the extended period of limitation. In their case, there was not even any ‘inaction’. The appellant were not supposed to provide the details of services on which credit was taken. Simply the total credit availed during the month was required to be furnished in the ER 1 which was duly done by us. As such, the benefit of these decisions is extendable to the appellant allowing the appeal. Further the order has not discussed these cases which were cited in the show cause notice also. In the case of ARBINDO LIQUORS LIMITED Versus COMMISSIONER OF CENTRAL EXCISE, NAGPUR [2001 (133) E.L.T. 631 (Tri. - Mumbai)] it has been held that the order which narrates only what the Assistant Commissioner said and not what the assessee said, is not justified. Such an order does not give anyinsight to the further appellate authority as to the correctness of the findings. It is for this reason that the principles of natural justice require that any order made in adjudication or in appeal, should be a “speaking” order.Thus, in the light of these decisions, the impugned orders are not justified and are liable to be set aside.
 
Issue:
 
Whether the credit of service tax paid on CHA services, the outward transportation services (freight on the transportation of goods from ICD to port of export) and Terminal Handling Charges are admissible to the appellant as “input service” in terms of Cenvat Credit Rules, 2004?
 
Finding of the Appellate Authority: -
 
- The Learned Commissioner appeal perused the definition of input services under Rule 2 (l) of the Cenvat Credit Rules, 2004. It was noted that service tax was paid on the CHA services, outward transportation services (freight on the transportation of goods from ICD to port of export) and Terminal Handling Charges. There is also no dispute that in terms of inclusion clause of input service, service used in relation to activities relating to business and used in outward transportation of export goods upto the place of removal is covered as input service.
 
- It was observed that the question for decision was that “what is the place of removal”? In this regard, reliance was placed on the clarification issued by CBEC vide its Circular No. 97/8/2007-ST dated 23.08.2007 (Particularly Para 8.2). Accordingly, it was held that therefore it is clear that for a manufacturer/consigner, the eligibility to avail credit of the service tax paid on the transportation during removal of excisable good would depend upon the place of removal as perthe definition. In case of a factory gate sale, sale from a non-duty paid warehouse, or from a duty paid depot (from where the excisable goods are sold, after their clearance from the factory), the determination of the “place of removal” does not pose much problem. However, there may be situations where the manufacturer/consigner may claim that the sale has taken place at the destination point because in terms of the sale contract/agreement (i) the ownership of goods and the property in the goods remained with the seller of the goods till the delivery of the goods in acceptable condition to the purchaser at his door step: (ii) the seller bore the risk of loss of or damage to the goods during transit to the destination; and(iii) the freight charges were an integral part of the price of goods. In such cases the credit of the service tax paid on the transportation upto such place of sale would be admissible if it can be established by the claimant of such credit that the sale and the transfer of property of goods (in terms of definition as under Section 2 of the Central Excise Act, 1944 as also in terms of the provisions under the Sale of Goods Act, 1930) occurred at the said place.
 
- It was held that from the above, it becomes clear that in cases where the export is on FOB basis, the appellant continue to remain owner of the goods in question till same are exported from port of export, the place of removal shall be the load port only as the manufacturer has to deliver the goods to the buyer at least up to the load port and the FOB price included the export expenses incurred for clearance of the goods at the port of export. The Hon’ble Tribunal in the case of M/s Kuntal Granite Ltd. 207 (215) ELT 515 has held that place of removal in case of export is load port. Further Hon’ble Tribunal in case of M/s Adani Pharmachem P Ltd-2008 (232) ELT 804 vide its order dated 8.4.2008 has held that since CHA services are required to facilitate clearances of final product from the place of removal i.e. lord port, the same is eligible for input service credit under Rule 2(l) of Cenvat Credit Rules, 2004. Further the Hon’ble Tribunal in the case of ABB Ltd. Vs CCE-2009 (15) STR 23 (Tri.-LB) has also held that service availed by the manufacturer for outward transportation or final products up to the place of removal should be treated as input services in terms of Rule 2(l) (ii) of Cenvat Credit Rules, 2004 and thereby enabling the manufacturer to take credit on the service tax paid on such services. Further Larger Bench of CESTAT vide its order dated 25.9.08 in the case of M/s GTC Ltd. 2008-TIOL 1634- CESTAT-Mumbai has held that in principle, credit of tax paid on those taxable services would be allowed that go to form part of the assessable value on which duty is paid on impugned services.
 
- Following the aforesaid judgments of the Hon’ble Tribunal, the Commissioner (Appeal) held that the cenvat credit of service tax paid on CHA services, the outward transportation services) freight on the transportation of goods from ICD to port of export) and Terminal Handling charges is admissible under the Cenvat Credit Rules, 2004.
 
- With regard to demand of interest and imposition of penalty, it was held that since the demand is held to be unsustainable on merit, there is no question of interest and penalty as held by Hon’ble Supreme Court of India in case M/s HMM Ltd – 1995 (76) ELT 497 (SC).
 
Decision of the Appellate Authority:-
 
Impugned order set aside. Appeal allowed.
 
Conclusion:-
 
The learned Commissioner (Appeal) rightly held that where the export is on FOB basis, the assessee-exporter remains the owner of goods till the port of export which will be the place of removal. Otherwise, the assessee-exporter who has borne the expense and paid service tax on the post removal services like outward transportation till port, CHA services will be in a disadvantageous position as he will not be able to take credit of service tax paid by him on the said services.

 ******