Case: Commissioner of Customs Central Excise &amp; Service Tax, Guntur Vs. M/s. The Andhra Sugars Ltd

2) For the sake of convenience, we may reproduce the events from Civil Appeal No. 11711 of 2011. The respondent M/s. Andhra Sugars Ltd. are the manufacturers of sugar, molasses etc. at their Tanuku, Taduvai & Bhimadole units and manufacturers of various inorganic chemicals at their Kovvur and Saggonda units. They were availing credit on inputs, capital goods and input services and utlising the same for payment of duty. It came to the notice of the Revenue that during the periods December, 2007, the respondent at their unit Saggonda, had taken credit of input services namely service tax paid on transportation charges upto the place of customers which according to the Revenue is inadmissible. Accordingly, show cause notice dated November 3, 2008 was issued to the respondent demanding the Cenvat Credit of Rs.3,87,763/availed during the above mentioned period along with interest and proposing to impose penalty under Rule 15 of the Rules, 2004. The aforesaid show cause notice was duly adjudicated by the Assistant Commissioner, Eluru Division videNo. 01/2009 dated January 9, 2009 confirming the demands initiated in the aforesaid show cause notice.3) The respondent being aggrieved by theNo. 01/2009 dated January 9, 2009 filed appeal before the Commissioner (Appeals), Guntur. VideNos. 46/2011 (G) ST dated December 2, 2011, allowed the appeals by setting aside thewith consequential relief to the respondent. The Revenue challenged theNo. 46 of 2011 (G) ST dated December 2, 2011 by preferring appeal bearing Appeal No.before the Customs, Excise and Service Tax Appellate Tribunal (CESTAT), Bangalore. The CESTAT vide final Order No. 26346/2013 dated August 14, 2013 dismissed the appeal filed by the Revenue holding that the same is covered by the decision of the High Court of Karnataka in the case of Commissioner of Central Excise and Service Tax, Bangalore v. ABB Ltd., Vadodara (2011 (23) STR 97 (Kar). Further, the CESTAT observed that the Revenue could not have filed appeals as per the instructions of the CBEC vide Circular F. No.dated August 17, 2011, as the amount involved is less than Rs.5 lakhs. Not satisfied with this outcome, the Revenue took the matter to the High Court in the form of Appeal No. 88/2014. The High Court vide its impugned judgment dated July 16, 2014 has dismissed the appeal filed by the Revenue holding thatan identical issue, this Court dismissed Central Excise Appeal No. 31 of 2013. Hence, this appeal is also

Court's reasoning:
7) Having regard to the definition of ‘inputthat was prevailing at the relevant time i.e. prior to April 1, 2008, the aforesaid contention of the Department cannot be accepted. As per the said definition, service used by the manufacturer of clearance of final products ‘from the place ofto the warehouse orplace etc., was exigible for Cenvat Credit. This stands finally decided in Civil Appeal No. 11710 of 2016 (Commissioner of Central Excise Belgaum v. M/s. Vasavadatta Cements Ltd.) vide judgment dated January 17,is, therefore, clear that for a manufacturer /consignor, the eligibility to avail credit of the service tax paid on the transportation during removal of excisable goods would depend upon the place of removal as per the definition. In case of a factory gate sale, sale from apaid warehouse, or from a duty paid depot (from where the excisable goods are sold, after their clearance from the factory), the determination of the ‘place ofdoes not pose much problem. 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 saidAs can be seen from the reading of the aforesaid portion of the circular, the issue was examined after keeping in mind judgments of CESTAT in Gujarat Ambuja Cement Ltd. and M/s. Ultratech Cement Ltd. Those judgments, obviously, dealt with unamended Rule 2(l) of Rules, 2004. The three conditions which were mentioned explaining the ‘place ofare defined in Section 4 of the Act. It is not the case of the Department that the three conditions laid down in the said Circular are not satisfied. If we accept the contention of the Department, it would nullify the effect of the wordthe place of removal appearing in the aforesaid definition. Once it is accepted that place of removal is the factory premises of the assessee, outward transportation ‘from the saidwould clearly amount to input service. That place can be warehouse of the manufacturer or it can beplace if from the place of removal the goods are directly dispatched to the place of the customer. One such outbound transportation from the place of removal gets covered by the definition of input service.