CENVAT Credit on input service of GTA up to Place of Removal - what is place of removal when rate of duty is specific? High Court stays Tribunal Order
IN Ultratech Cement Ltd V Commissioner of Central Excise - 2014-TIOL-478-CESTAT-DEL, the CESTAT held that when duty is chargeable at specific rates, and not at ad-valorem rates under Section 4 of the Central Excise Act, 1944, the definition of 'place of removal' as given in Section 4(3)(c) of the Central Excise Act is not be applicable and the 'place of removal' will be the factory gate. And in such cases, CENVAT Credit cannot be allowed of service tax paid on GTA Service availed for outward transportation of the goods from the factory to Depot/Dump or the Customers' Premises.
With regard to the CENVAT Credit demand for the period from 01.04.08, in all the appeals, there is no dispute that the definition of 'input service' as given in Rule 2(l) covered GTA Service availed for transportation of finished goods only up to the 'place of removal'. The main point of dispute for this period is as to what is the 'place of removal', whether the factory gate or depot/dump or customers' premises.
CBEC had in a letter in F.No. 137/3/2006-CX.4 dated 02.02.2006, clarified that "in case of depot sales of goods, the credit of service tax paid on the transportation of goods up to such depot would be eligible, irrespective of the fact, whether the goods were chargeable to excise duty at specific rates or ad valorem rates on the basis of valuation under section 4 or 4A of the Central Excise Act."
In Lafarge India Pvt Ltd v Commissioner of Central Excise - , the Tribunal said, the correctness of this circular is doubtful. DDT said, Board grants a favour but Tribunal says NO - -13.08.2012.
In the Ultratech case, the AR for the Department argued that this view (of the Board) is not correct as the definition of "place of removal" in section 4(3)(c) of the Central Excise Act, as is clear from the opening words of the sub-section(3) "for purpose of this section" is for the purpose of this section only and this section i.e. section 4, is applicable only when duty on any excisable goods is chargeable with reference to their value and goods are not covered by the provisions of section 3(2) or section 4A and the assessable value is required to be determined under Section 4; since the duty on cement is at specific rate, the definition of 'place of removal' as given in section 4(3)(c) would not be applicable and as such the place of removal will be the factory gate i.e. place on removal from where the duty payable is payable.
The Tribunal almost agreed with the AR when it observed;
Therefore, when the duty on the finished goods is chargeable at ad-valorem rate on value determined under section 4, only then the definition of 'place of removal' as given in section 4(3)(c), can be adopted for the purpose of Cenvat Credit Rules, 2004 and in other cases the natural meaning of the expression 'place on removal' i.e. the place on removal from which the duty on the goods is liable to be paid i.e. the factory gate or Bonded Warehouse, which would have to be adopted.
Therefore, when the 'place of removal' has been defined under section 4(3)(c) for the purpose of determining value under section 4, in our view the definition of 'place of removal', cannot be adopted for Cenvat Credit Rules, 2004 when the duty on the finished goods is at specific rate or is chargeable at ad-valorem rate on the tariff value fixed under section 3(2) or on value determined under section 4A in which cases the definition of 'place of removal' in Section 4(3)(c) is not relevant.
So, the Tribunal rather emphatically overruled the Board Circular and held the CENVAT credit cannot be allowed on GTA for outward transport in cases where the duty was charged on specific rate or on RSP.
The matters were remanded for de-novo adjudication based on this decision.
Naturally the aggrieved assessee took the matter in appeal to the High Court, with a question of law, as to whether in the case, where the rate of duty is specific, the place of removal would be factory gate or the customer premises.
The High Court recently stayed the Order of the Tribunal so far it relates to remand. That is the Commissioner cannot immediately adjudicate the case and pounce upon the assessee to recover the wrongly availed credit.
In all these legalese are we forgetting the primary basic purpose of CENVAT Credit - avoiding the cascading effect of taxation?
What does the Government gain by such trivial and silly legislation and more trivial and silly litigation?