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ONE OF THE CONDITIONS FOR AVAILING CENVAT CREDIT ON OUTWARD TRANSPORTATION FROM THE PLACE OF REMOVAL IS THAT SELLER HAS TO BEAR THE RISK OF LOSS OR DAMAGE TO THE GOODS DURING TRANSIT: CESTAT, Kolkata Bench

A. Brief facts of the case:

The issue involved in the present case is whether appellant will be eligible to CENVAT Credit on transportation services from the factory to the point of delivery of the customers.

The brief fact of this case is that the Respondent (M/s. Bijoy Concrete Works) has taken CENVAT Credit on outward transportation from the place of removal. As per the language of contract between the Respondent and its buyer, the damages if any during transportation will not be responsibility of the Respondent.

It is pertinent to mention here that CBEC  master circular No. 97/8/2007-ST dated 23/08/2007 provides that 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 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. If these conditions are not fulfilled then CENVAT credit is not admissible.

That the Adjudicating Authority has disallowed the CENVAT Credit on the ground that as per the language of contract between the Respondent and its buyer, the damages if any during transportation will not be responsibility of the Respondent. Contrary to this, the First Appellate Authority has allowed the CENVAT Credit in terms of the CBEC Circular No. 137/3/2006-CX dated 2/2/2006. Thus, Revenue filed this Appeal before the Hon’ble Tribunal.

 B. Discussions and Findings:

Ld. A.R. appeared on behalf of the Revenue reiterated the facts of the case and contended that CBEC Circular No. 137/3/2006-CX dated 2/2/2006 is not applicable as held by the First Appellate Authority. Further, the A.R. pointed out that as per the language of contract, the damages if any during transportation will not be responsibility of the Respondent. It was also contended that as per para 8.2 of CBEC  master circular No. 97/8/2007-ST dated 23/08/2007 if the conditions are not fulfilled CENVAT credit is not admissible.

Ld. A.R. relied upon the case law of Calcutta High Court  in the case of  CCE, Kolkata-VI Vs. Vesuvious India Ltd. [2014 (34) S.T.R. 26 (Cal.)] and argued that on the same issue jurisdictional High Court has held the authenticity of CBEC Circular 97/8/2007-S.T. dated 23 August, 2007.

On the other side, the Consultant appearing on behalf of the Respondent argued that the appeal filed by the Revenue is time barred as the period of limitation has to be counted from the date of order passed by the First Appellate Authority and not from the date of receipt of Order-in-Appeal dated 11/02/2010. Ld. Consultant relied upon the Apex Court decision in the case of CCE Vs. M.M. Rubber Co.  reported in 1991(55) E.L.T. 289 (S.C.).

 C. Judgment of the Hon’ble Tribunal:

Heard both sides and perused the case records, Hon’ble Tribunal observed the decision of the Apex Court in the case of CCE Vs. M.M. Rubber Company (supra) relied upon by the Ld. Consultant. On perusal of the case law, it is observed that the same is pertaining to suo motto review orders passed by the Departmental officers under Section 35E (3) of the Central Excise Act, 1944 which gives the Departmental officers and CBEC the power to review. Hon’ble Tribunal held that in the present case the limitation with respect to Order-in-Appeal passed by the First Appellate Authority will be as provided in the Central Excise as the issue is not pertaining to order-in-review passed by the Committee of Commissioner. Accordingly, in the present appeal the relevant date for the purpose of computing available period has to be calculated from the date of receipt of Order-in-Appeal passed by the first appellate authority. Consequently, the preliminary objection raised by the Respondent is rejected.

On the issue of admissibility of CENVAT Credit, Hon’ble Tribunal held that Jurisdictional Kolkata High Court in the case of CCE, Kolkata Vs. Vesuvious India Ltd. (supra) has upheld the authenticity of CBEC Circular No. 97 (8)/2007-ST DATED 23/08/2007.

It is observed by the Tribunal from para 8.2 of the said circular dated 23/8/2007 that one of the conditions for availing such credit is that seller has to bear the risk of loss or damage to the goods during transit. It is also observed from para 2 of Order-in-Original dated 30/10/2008 that as per contract appellant is not responsible for any damage during transit and unloading of goods.

Accordingly, Hon’ble Tribunal held that the conditions prescribed by CBEC for availing CENVAT credit on transportation services beyond the factory are not satisfied. In the existing factual matrix, it has been held that the contract between appellant and the customers is not on FOR destination basis. As a result, the order passed by the First Appellate Authority is set aside. The Appeal filed by the Revenue is allowed and Order-in-Original passed by the adjudicating authority is restored.

[Commissioner of Central Excise, Patna v. M/s. Bijoy Concrete Works in Excise Appeal No. 328/2010, C.O.-75375/16]

Date of the Judgment: July 25, 2016.

Tags: Central Board of Customs & ExciseCentral ExciseCentral Excise ActCESTATIndirect taxIndirect Taxation

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