CLR Editorial Notes: The question whether the port of export could be considered to be place of removal of excisable goods was examined by the division bench in this case, with reference to the definition of place of removal under Section 4(3) of the Central Excise as also to Section 5 of the Central Sales Tax Act. On a harmonious construction of the provisions, it was held that, in respect of the excisable goods cleared from factory for export and subsequently shipped from the port, the port of export could be held to be the place of removal .
2013-ITS-145-CESTAT-M/s Grindwell Norton Ltd -Vs- Commissioner of Central Excise Bangalore. , Dated 07/2/2013
CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL, SOUTH ZONAL BENCH
Bench Single Member
Date of hearing: 07.02.2013
Date of decision: 07.02.2013
Central Excise Appeal Nos. 1688 & 1689 of 2011
[Arising out of Order-in-Appeal No. 114/2011 C.E. dated 25.3.2011 and Order-in-Appeal No. 113/2011 C.E. dated 29.3.2011, passed by the Commissioner of Central Excise, (Appeals-I), Bangalore]
For approval and signature:
Hon ble Shri P. G. Chacko, Member (Judicial)
M/s Grindwell Norton Ltd. Appellant
Commissioner of Central Excise, Respondent Bangalore.
Mr. Cherian Punnoose, Advocate for appellant
Mr. A. K. Nigam, Additional Commissioner (AR) for respondent
CORAM : Hon ble Shri P. G. Chacko, Member (Judicial)
ORDER No .. Dated 07/2/2013
In the first appeal, the challenge is against denial of CENVAT credit on Tour Operators Service which was used by the appellant for transportation of their employees between the factory and their place of residence during the material period (April 2006 to May 2007). After hearing both sides and considering their submissions, I find that the issue is no longer res integra. In the case of C.C.E., Bangalore vs. Stanzen Toyotetsu India (P) Ltd. [2011 (23) S.T.R. 444 (Kar.)], the Hon ble High Court held as under :-
13. Rent-a-Cab service is provided by the assessee to these workers to reach the factory premises in time which has a direct bearing on the manufacturing activity. In fact the employee is also entitled to conveyance allowance. It also would form part of a condition of service and the amounts spent on the conveyance of the employees is also a factory which will be taken into consideration by the employees in fixing the price of the final product. By no stretch of imagination can it be construed as a welfare measure. It is a basic necessity. To ensure that the work force comes on time at the work place, the employers have taken this measure which has a direct bearing on the manufacturing activity. At any rate it is an activity relating to business.
In respect of another unit of the appellant-company, a coordinate Bench of this Tribunal followed the above decision of the Hon ble Karnataka High Court and held that Rent-a-Cab Service used for transportation of employees between their place of residence and the factory was integrally connected with the activity of manufacture and hence an input service under Rule 2(l) of the CENVAT Credit Rules, 2004 vide Final Order No. A/255/2012/SMB/CIV dated 27.8.2012 in Appeal No. E/1190/2012 (Grindwell Norton Ltd. vs. CCE, Mumbai).
For a subsequent period (October 2008 to September 2009), in respect of the present appellant, both the original authority and the first appellate authority allowed CENVAT credit on the same service used for transportation of employees. There is nothing on record to show that the appellate Commissioner s order (Order-in-Appeal No. 378/2011 dated 30.11.2011) was challenged by the department.
2. In the order passed by the original authority in the instant case, in the context of considering the assessee s reliance on the Tribunal s decisions in the cases of Stanzen Toyotetsu India (P) Ltd. and T. G. Kirloskar Automotive (P) Ltd., it was observed that both the decisions had been appealed against by the department and hence the issue decided therein had not reached finality. I find that, in the said cases, the appeals filed by the department have been dismissed by the Hon ble High Court vide 2011(23) STR 444 (Kar.) and  32 STT 251 (Kar.).
3. In the result, the order impugned in the first appeal requires to be set aside. It is ordered accordingly and the appeal is allowed.
4. In the second appeal, the challenge is against denial of CENVAT credit on CHA service used by the assessee for export of goods during the period from June 2007 to September 2008. The original authority allowed the credit to the assessee but the appellate authority set aside the lower authority s order. Hence the present appeal of the assessee.
5. After hearing both sides and considering their submissions, I find that the appellant is heavily relying on Final Order Nos. 674-675/2012 dated 28.9.2012 passed by this Bench in Appeals No. E/1621 & 1622/2010. One of the issues which arose in the cited appeals was whether the respondent (assessee) was entitled to take CENVAT credit on CHA service which was used in connection with export of certain goods during 2008-09. Paragraph 7(i) of the cited Final Order embodies the decision on the issue and the same reads as follows :-
7. I have carefully considered the submissions.
(i) Whether the respondents were entitled to claim CENVAT credit on GTA service/CHA service availed for export of excisable goods during the relevant period.
It has been argued on behalf of the appellant that the definition of place of removal is applicable only to valuation of excisable goods for the purpose of levy of duty. In this connection, reliance has been placed on the Hon ble Karnataka High Court s decision in the case of Commissioner vs. ABB Ltd. (supra) [2011 (23) S.T.R. 97 (Kar.)]. I find that clause (t) of Rule 2 of the CENVAT Credit Rules, 2004 was not taken into account by the Hon ble Karnataka High Court while holding that the definition of place of removal was applicable only to valuation of excisable goods. As per Rule 2 (t), words and expressions used in these rules and not defined but defined in the Excise Act shall have the meanings respectively assigned to them in the said Act. It would follow that the definition of place of removal given under Section 4(3) of the Central Excise Act would be applicable to cases arising under the CENVAT Credit Rules, 2004 also as there is no separate definition of place of removal under these Rules. The expression place of removal was examined by a division bench of this Tribunal in the case of Kuntal Granites (supra). The full text of the Tribunal s order reads as follows:
Both these appeals raises common question of law and facts pertaining to the same assessee and hence they are taken up together for disposal as per law. By O-I-O No. 1/05, dated 21-4-05, the Commissioner has rejected the application filed by the appellant seeking revision of Central Excise duty under Rule 21 with regard to the goods dispatched to the lorry which met with an accident resulting in spillage of 51 pieces of granite slabs meant for export leading it its destruction. As a result of this rejection, the revenue has confirmed the demand of duty by Order-in-Appeal No. 5/06, dated 10-1-06 on the ground that assessee is required to discharge duty on the quantity of polished granite slabs which were destroyed in the accident as their prayer for remission of duty has been rejected by the Commissioner. The appellants contention is that in terms of Rule 21 of C.E. Rules they are entitled to claim remission if the goods were destroyed due to unavoidable accident at any time before removal of the goods. It is the submission of the assessee that the place of removal has been defined under Section 4(3)(c) of the Central Excise Act 1944 which is as under :-
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.
In this connection learned Counsel draws our attention to the provisions in Central Sales Tax Act. He refers to Section 5 of the Act which is noted herein below :-
When is a sale or purchase of goods said to take place in the course of import or export. – (1) 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.
He points out that in respect of export goods, place of removal will be only when the documents are presented to the Customs Officers for export. The finding given by the authorities that the place of removal is factory is not correct in respect of export goods as the sale comes into effect only when the documents of title to the goods are presented at the Customs office in the form of presentation of shipping bills. He submits that when clearances are made under bond, are deemed to be under overall customs control. This has been so held by the Tribunal in the case of Sangita Printers & Exporters v. CCE, Allahabad [1994 (73) E.L.T. 182 (T)]. He also submits that the Apex Court in the case of M.J. Exports Ltd. v. CEGAT [1992 (60) E.L.T. 161 (S.C.)] has explained the expression, for home consumption vis-a-vis expression warehousing . He also refers to the ruling rendered by this Bench in the case of Koeleman India Pvt. Ltd. v. CC, Bangalore [2005 (192) E.L.T. 866 (T-Bang.)] which has clearly held that when the goods are damaged during transportation from factory to the port of export, and due to reasons beyond the control of appellants then, it has to be held that there is no diversion for home consumption and demands were set aside. He points out to another ruling of the Mumbai Bench in the case Associated Capsules Pvt. Ltd. v. CCE, Pune [2007 (207) E.L.T. 613 (Tribunal) = 2006-TIOL-1497-CESTAT-Mum] on the same point which is in his favour. He submits that the Revenue s reliance on the Northern Bench reliance in the case of Ginni Filaments Ltd. v. CCE, Lucknow [2005 (188) E.L.T. 45 (Tri-Del.)] is sub silentio to the provisions of Rule 4(3). However, Section 4(3)(c) of the C.E. Act defines the place of removal to be read with Section 5 of the Central Excise Act. Therefore the Single Member Bench ruling in the case of Ginni Filaments has no bearing in the matter.
2. Learned DR relies on the Single Member Bench ruling rendered in the case of Ginni Filaments Ltd.
3. We have considered the submissions and agree with learned Counsel on the legal point. The SMB in the case of Ginni Filaments has not examined the provisions of Section 4(3)(12) of Central Excise Act read with Rule 21 of Central Excise Rules and Section 5 of the Central Excise Act. When the goods are removed from the factory for export purposes and the goods are destroyed due to unavoidable reasons, accident caused to the lorry, then in such a circumstances the goods are not deemed to have been removed from the factory gate in terms of Section 5 of the Central Sales Tax Act as sale has not been completed. Section 4(3)(c) of C.E. Act clearly explains that the place of removal is the premises from where excisable goods are to be sold after their clearance from the factory. In the present case, the goods were exported and when export documents are presented to the Customs office, then that is the place of removal as per Section 5 of C.E. Act. The same finding has been rendered by this bench in the case of Koeleman India Pvt. Ltd. v. CC, Bangalore [2005 (192) E.L.T. 866 (T-Bang.)]. There is no reason to take a different view from the same. The finding recorded by SMB in Ginni Filaments Ltd., is sub silentio without due consideration to the provisions of law. Hence Both the orders are set aside by allowing the appeal with consequential relief if any.
The learned Superintendent (AR) made an attempt to distinguish the above case by submitting that the above decision was rendered in respect of remission of duty and not in respect of CENVAT credit. This distinction is inconsequential inasmuch as there is only one definition of place of removal under the Central Excise Act or the Rules framed thereunder whether for the purpose of valuation of excisable goods or for the purpose of determination of claim of CENVAT credit or for any other purpose whatsoever. The question whether the port of export could be considered to be place of removal of excisable goods was examined by the division bench in the above case, with reference to the definition of place of removal under Section 4(3) of the Central Excise as also to Section 5 of the Central Sales Tax Act. On a harmonious construction of the provisions, it was held that, in respect of the excisable goods cleared from factory for export and subsequently shipped from the port, the port of export could be held to be the place of removal . In view of this decision, it has to be held that the respondents were entitled to treat CHA service/GTA service as input services under Rule 2(l) of the CENVAT Credit Rules, 2004 as these services were used for clearance of excisable goods from the place of removal .
It was submitted by the learned Superintendent (AR) that the decision in Kuntal Granites case was appealed against by the department. However, it was not claimed that the Tribunal s decision was stayed by the appellate court. The outcome of department s appeal in Kuntal Granites case is also not available. Hence the decision in Kuntal Granites case will be a valid precedent for the present cases.
No claim of appeal against the above decision of this Bench has been made before me.
6. In the result, the impugned order denying CENVAT credit to the assessee on CHA service used for export of goods is set aside and the appeal is allowed.