It appears that Manufacturer of Goods attracting Specific duty, Tariff Value or MRP based valuation, are availing Input service credit for services freight, Storage & other services used for stock transfer of goods to their Depot, Branch, godown, warehouse, or any other place from which the said goods is being removed for further delivery to effect sale, on the basis of CBEC Circular No. F.No. 137/3/2006-CX.4 dated 02.02.2006 and para 8.2 of CBEC Master Circular No. 97/8/2007 dated 23.08.07. Relevant para of both the circulars are reproduced as under.
Circular No F.No. 137/3/2006-CX.4 dated 02.02.2006:
Para- 4: In view of the above, the undersigned is directed to state 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.
(This circular was withdrawn by Master Circular No. 97/8/2008 dated 23.08.2007 and aspect was covered in master circular)
Master Circular No. 97/8/2007 dated 23.08.07
Para 8.2: …. However, there may be situations where the manufacturer/consignor 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 up to 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 in goods (in terms of the 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.”
2. The above both circulars were issued considering erstwhile definition of “input service” given at Rule 2(l) of the CCR’2004 having phrase “clearance of final products from the place of removal” in its main part, which is already is substituted since 01.04.2008 with the phrase “clearance of final products upto the place of removal”. Also, the phrase “activities relating to business, such as” as referred in inclusive part of definition of “Input service” has been omitted since 01.04.2011. Hence, in terms of amended definition of “input service”, Para 8.2 of Master Circular No. 97/8/2007 dated 23.08.07 has lost its significance and have no effect, though the said circular with Para 8.2 is in force, till date.
In the case of Vesuvious India Ltd. Vs. CCE, Kolkata-VI [2014 (34) S.T.R. 26 (Cal.)], the Hon’ble Kolkata High Court held that,
“Cenvat credit - Input service - Service Tax paid for outward transportation of goods upto the point of delivery to the customer - Outward transportation charges or taxes paid in regard thereto claimable only with regard to transports made from one place of removal to another place of removal and not to destination - C.B.E. & C. Circular No. 97/8/2007-S.T., dated 23-8-2007 does not provide for the allowance for all cases, made relaxation in some cases having factual background - Rule 2(l)(ii) of Cenvat Credit Rules, 2004. - By the amendment made w.e.f. 1-4-2008 substituting the word “from” by the word “upto” all that has been done to clarify the issue. Neither the services rendered to the customer for the purpose of delivering the goods at the destination was covered by the definition of input service prior to 1-4-2008, nor is the same covered after 1-4-2008. [paras 5, 13]”
3. Also there are judgments wherein specific issue of availability of Cenvat Credit for service used till place of removal in respect of goods 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 4 A in which cases the definition of “place of removal‟ in Section 4 (3)(c) is not relevant. Though the same judgments are related to Stay and not final order, the discussion of Cenvat provisions is concrete and we may adopt and implement the clarification.
(A) Lafarge India Pvt. Ltd.Vs. CCE, Raipur [2012 (285) E.L.T. 390 (Tri. - Del.)]
Stay/Dispensation of pre-deposit - Cenvat credit - Input services - Prima facie, C.B.E. & C. Circular No. 137/3/2006-CX., dated 2-2-2006 prescribing that Cenvat credit of Service Tax paid on transportation upto depot would be admissible even if goods attract duty at specific rate, found to take incorrect view as Section 4(3) of Central Excise Act, 1944 makes it clear that definitions of various terms therein are only for purpose of Section 4 - Also, definition of “place of removal” in Section 4(3)(c) ibid is relevant only for determining assessable value.
“From the very first sentence of Section 4 it is clear that the provisions of this Section are attracted only when the duty on the goods is at an ad valorem rate and for this purpose, the “assessable value” on which duty at ad valorem rate is to be calculated has to be determined.”
(B) Ultratech Cement Ltd.Versus CCE., Chandigarh [2013 (30) S.T.R. 220 (Tri. - Del.)]
HELD : Though Board vide Circular No. 97/8/2007-ST-CX., dated 23-8-2007 had clarified that in cases where the sales are on FOR destination basis, it is buyer’s premises, which is to be treated as the place of removal for the purpose of availing Cenvat credit of GTA service, in case of cement chargeable to specific rate of duty, the definition of ‘place of removal’ provided for in Section 4(3) of Central Excise Act, 1944 “for the purpose of this Section only” (i.e. for the purpose of Section 4 ibid only) cannot be adopted for the purpose of Cenvat Credit Rules, 2004 - The place of removal in such cases would be the place on removal from which duty is payable on the goods, which in this case would be the factory gate [paras 7, 8]
(C) M/s Ultratech Cement Ltd. Vs. CCE, Raipur [2013 (4) ECS (104) (Tri – Del)]
“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 4 A in which cases the definition of “place of removal‟ in Section 4 (3)(c) is not relevant.” [Para 9.6]
“We, therefore, hold that for the period w.e.f. 01.04.2008, while Cenvat Credit of service tax paid on the GTA Service availed for transportation of the finished goods up to the “place of removal‟ would be admissible, the definition of “place of removal‟, as given in section 4 (3)(c) would be applicable only in the cases where the rate of duty on the finished goods is chargeable at ad-valorem rate on the value determined under section 4 and in other cases the “place of removal‟ would be the factory gate.”[Para 9.7]
“Where the rate of duty is specific, the “place of removal‟ would be the factory gate and as such there would be no question of permitting Cenvat Credit of service tax paid on GTA Service availed for outward transportation of the Cement from the factory to Depot /Dump or the Customers‟ Premises.” [Para 11]
5. From the above judgments, it is clear that “Place of Removal” is factory gate for the Goods attracting Specific duty, Tariff Value or MRP based valuation, hence Cenvat credit of any services received after their clearance from factory gate is not admissible.
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