The Division Bench of Chhattisgarh High Court in the case of M/s Ultratech Cement Ltd. has allowed the assessee’s appeal against the order of the Delhi Tribunal, wherein Cenvat credit on outward transportation upto customer’s premises was denied in case of FOR sales of goods on which excise duty was paid under Section 4A or at specified rates.
[Judgment dated 5th August, 2014 in Tax Case No. 8/2014 & 9/2014]
The High Court has held that in the absence of any provision/ clarification in the Excise Act or in the Rules or in any CBEC Circular to hold that in case the duty is charged on the specified rate, then the place of removal will be factory gate, the presumption by the Tribunal that the place of removal is factory gate of the manufacturer is incorrect.
The High Court relied on its order dated 12th March, 2014 in Tax Case No. 34/2011 in the case of Lafarge India Ltd., wherein it was held as follows -
“Though Section 4(3)(c) of Excise Act defines the word ‘place of removal’ for purpose of Section 4, but in absence of its meaning for other sections, it would be applicable unless it is otherwise provided.
If under the terms of contract, the sale takes place at the destination then that place may be the place of removal and service tax paid on GTA service for transporting the goods upto destination might be available for taking Cenvat credit”.
The High Court has finally held that depending upon terms of sale, place of removal can be factory gate of the assessee or the premises of the consumer.
Once place of removal is the premises of the consumer, Cenvat credit of service tax paid on GTA service for transportation of goods upto customer’s premises would be available, even in case of goods on which excise duty is chargeable at specified rates (i.e. based on MRP or other specific rates).
The above judgment is relevant for the period prior to 11.7.2014 i.e. prior to insertion of definition of place of removal under the Credit Rules.
HC has effectively reversed the Customs Excise & Service Tax Appellate Tribunal (CESTAT) in the case of Ultratech Cement Limited v. CCE [TS-248-Tribunal-2013-EXC] (the taxpayer) wherein held that, where duty is chargeable at specific rates or at the value determined under Section 4A, 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) would not be applicable and as such the ‘place of removal’ will be the factory gate.
Therefore, in such cases, Cenvat Credit cannot be availed with respect to service tax paid on transportation of final products beyond the factory gate.