AMBUJA CEMENTS LTD Vs. UNION OF INDIA

JUDGEMENT

(1.) THE assessee has approached this Court by filing the instant appeal under Section 35 -G of the Central Excise Act, 1944 (for brevity, 'the 1944 Act') by challenging order dated 14.3.2007 passed by the Custom, Excise and Service Tax Appellate Tribunal, Principal Bench, New Delhi (for brevity, 'the Tribunal'). The appeal was admitted on the following substantive questions of law: 1. Whether the service of transportation up to the customer's doorstep, in the case of 'FOR destination' sales where the entire cost of freight is paid and borne by the manufacturer, would be 'input service' within the meaning of Rule 2(1) of the CC Rules?

(2.) WHETHER interest ought to have been demanded in the present case? 2. Brief facts of the case necessary for deciding the questions of law raised before us are that the assessee M/s Ambuja Cements Ltd. is a private limited company incorporated under the Companies Act, 1956. It is engaged in the business of manufacturing and selling of cement which is a excisable commodity classified in Chapter 25 of the Ist Schedule appended to the Central Excise Tariff Act, 1985. One of its factory is located in District Ropar within the jurisdiction of this Court. The appellant has claimed that it has been paying central excise duty at the appropriate rate in respect of cement produced by it and there is no dispute in that regard. The assessee also claimed that when it supplies cement to its customers 'FOR destination' it bears the freight in respect thereof up to the door steps of the customer that is the destination point. On the afore -mentioned freight the assessee also bears the service tax which has remained undisputed. On that basis the assessee has asserted that once service tax is paid by it then it becomes entitled to take Cenvat credit of such service tax in accordance with the Cenvat Credit Rules, 2004 (for brevity, 'the CC Rules'). The assessee had taken the Cenvat credit on such service tax paid by it. On 30.3.2006 the Commissioner, Central Excise, Ludhiana, issued a show cause notice to the assessee asking it to show cause as to why the Cenvat credit taken by it from March, 2005 to January, 2006 on payment of service tax be not recovered. The show cause notice also proposed to recover interest and penalty ('B'). The appellant filed reply and written statement ('C'). In his order -in -original dated 21.11.2006 ('D'), the demand raised in the show cause notice was confirmed by raising duty demanded along with interest. The assesssee filed an appeal before the Tribunal which was dismissed on 14.3.2006 ('F'). The Tribunal was persuaded to accept the argument of the revenue that the payment of service tax on the freight incurred by the assessee was not input service as per Rule 2(1l) of the CC Rules. The view of the Tribunal is discernible from paras 12 and 13 of the order which reads thus: 12. Having considered the submissions made by both sides, we find in favour of the revenue. We may now state our reasons. Crucial point to be noted in regard to Cenvat Credit is that credit availability is in -regard to 'inputs'. The credit covers duly paid on input materials as well as tax paid on services, used in or in relation to the manufacture of the 'final product'. Therefore, extending the credit beyond the point of duty paid removal of the final product would be contrary to the Scheme of Cenvat Credit Rules. 13. The interpretation sought to be placed by the appellant does not flow from the definition of input service (reproduced in para 5). The main clause in the definition states that the service in regard to which credit of tax is sought, should be used' in or in relation to clearance of the final products from the place of removal. The learned SDR has brought to our notice the decisions of this Tribunal to the effect that transport does not come, the scope of clearance or forwarding. Further, that transportation (freight) is an entirely different activity from manufacture remains settled by the judgements of Hon'ble Supreme Court in the cases of Bombay Tyre International (1983 (14) ELT), Indian Oxygen Ltd. 1988 (36) ELT 723 Supreme Court and Baroda Electric meters 1997(94) ELT 13 SC.

(3.) HE has further argued that the words and expression used in CC Rules and not defined but are defined in the 1944 Act or the Finance Act, 1994 (for brevity, 'the 1994 Act') are to have the meaning respectively assigned to them in those enactments. In that regard reliance has been placed on Rule 2(t) of the CC Rules. On that basis it has been submitted that the expression 'place of removal' used in Rule 2(1l)(ii) of the CC Rules has to be assigned the meaning given to that expression by Section 4(3)(c) of the 1944 Act. Learned Counsel has emphasised that 'place of removal' means as per the provisions of Section 4(3)(c)(iii) a depot, a premises of consignment agent or any other place or premises from where excisable goods are to be sold after their clearance from the factory.