CX - CENVAT Credit on Outward Transport - Goods sold on FOR basis - Destination is place of removal - credit entitled - drafting of adjudication orders requires training; incompetent departmental adjudication ill serves interests of State - Strictures and Costs against Commissioner: CESTAT
By TIOL News Service
NEW DELHI, OCT 08, 2014: THE impugned order disallowed Cenvat credit of Rs.3 ,19,79,457 /- availed by the assessee on outward transportation charges besides confirming levy and collection of interest and penalty as specified in the order.
The assessee is a manufacturer of cement. In response to the show cause notices, assessee specifically pleaded [recorded at paragraphs G & H of the impugned order],
1. that the assessee sells its final products on FOR basis to all customers;
2. that freight charges are included in the assessable value of the final product; that excise duty was discharged on the assessable value, inclusive of freight charges;
3. that the transit risk, in transportation of the final products is borne by the assessee;
4. that property in the goods passes to the customers on delivery at the customers premises;
5. that on the basis of these transactional facts, the place of removal under Section 4 (3) (c) of the Central Excise Act, 1944 was the customers premises; and therefore availment of Cenvat credit was legitimate and unassailable.
As noticed and adverted to in the impugned order, assessee not only pleaded that all its sales are on FOR basis and that duty was also remitted treating the place of removal as the customers premises but further, that terms of the contract between the assessee and its customers expressly refers to the FOR basis of the sales. Para H.13 of the impugned order clearly records the plea and adverts to the transactional and other documents furnished by the assessee, including sample copies of declarations issued by customers, in substantiation of this contention. (Annexure V to the reply, to the show cause notices).
The Tribunal noticed that the Commissioner's order had no analysis (of the material on record, furnished by the assessee in support of its contentions, adverted to in paragraphs G & H of the impugned order) except mere ipse-dixit conclusions recorded bereft of any reasons.
The tribunal observed,
"the order impugned states that the assessee failed to fulfill the conditions delineated in the Board Circular, in particular condition No. (iii), regarding submission of proof of freight charges being an integral part of the price of the goods. Conveniently, either by design or default, the learned Commissioner fails to advert to the specific contentions and the material evidence submitted by the assessee, while recording this wholly perverse conclusion . At para 32 of the order, the reference and reliance placed by assessee on the several precedents including the judgment of the Punjab & Haryana High Court in Ambuja Cements Ltd. is brushed aside on the ground that these cases deal with a different matter and are not relevant to the instant case. A more casual and negligent approach to adjudication and disregard for binding precedents is perhaps difficult to replicate.
Paras 1 to para 29 of the impugned order chronologically enumerate the facts relating to initiation of proceedings, contentions of the assessee, the case of the Department and the defence by the assessee alongwith material marshaled and the precedents cited by the assessee, and reference to the Board Circular. The contribution of the learned Adjudicating Authority to the adjudication process is confined to paras 30 to 32. As earlier noticed, there is no material contribution, in terms of analyses or reasons.”
Verbiage and prolixity is no substitute for quality: The Tribunal noted, "In an adjudication order, verbiage and prolixity is no substitute for quality. The conclusions recorded in paras 30 to 32 are bereft of any reasons. We are thus constrained to record that the impugned order is wholly perverse and a sub-standard exhibit of adjudication. As pointed out by the Supreme Court in Union of India vs. Mohan Lal Capoor AIR 1974 S.C. 87 ; Reasons are the links between the material on which conclusions are based and the conclusions. Mere recording of a conclusion in the impugned order, that the assessee had failed to fulfill the relevant conditions for treating its sales as on FOR basis and is consequently disentitled to claim Cenvat credit on the component of the freight charges incurred by treating the place of removal as the customers premises, is a conclusion, as earlier noticed, wholly bereft of analysis and clearly contrary to the material and evidence on record.
Despite valiant efforts, learned AR was unable to identify even a scintilla of reason by the Adjudicating Authority, for predicating the bald conclusions set out in the impugned order.
In M/s Ultratech Cement Ltd. vs. CCE, Raipur, 2014-TIOL-478-CESTAT-DEL, this Tribunal, following earlier judgments including the judgment in Gujarat Ambuja Cements Ltd. vs. CCE, Ludhiana, ruled that in cases where the duty on the final product is levied at a specific rate or on ad-valorem rate but the value determined on the basis of MRP under Section 4A or on tariff value fixed under Section 3 (2), the place of removal would be the factory gate. This judgment was reversed by the Chhattisgarh High Court in Ultratech Cement Ltd. vs. CCE, Raipur reported in 2014-TIOL-1437-HC-CHHATTISGARH-CX.
The High Court followed its earlier decision in Lafarge India Ltd. vs. CCE, Raipur reported in 2014-TIOL-1720-HC-CHHATTISGARH-CX. The High Court clearly ruled that there is no provision in the Central Excise Act, 1944 or its rules or in any Circular issued by the Board, that where Duty is charged on a specified rate, the place of removal would invariably be the factory gate. The place of removal would depend upon the specific transaction in issue and where the removal is pursuant to sales on FOR basis, with the risk in the goods manufactured being borne by the manufacturer till delivery to the customer at its premises and where the composite value of sales include the value of freight involved in delivery at the customers premises, the place of removal would not be at the factory gate, but at the customers premises, held the High Court.
On the above analysis, the impugned order dated 29/04/13 passed by the learned Commissioner, Central Excise, Rohtak is unsustainable and is accordingly quashed.
Since the impugned order records conclusions without any analysis of the pleadings and the evidence on record, Tribunal considered it appropriate to impose costs of Rs.2 ,500 /- to be remitted by Revenue to the credit of the assessee, within 30 days.
Tribunal was also constrained to observe that adjudication and drafting of adjudication orders requires training; and incompetent departmental adjudication ill serves the interests of the State. Apart from accentuating the appellate docket load, such casual orders contribute to faith deficit in the process of departmental education and imperils the due process of law. The appropriate authorities may consider this pathology writ large in departmental adjudication. For this purpose, Tribunal directed that a copy of this judgment be marked to the Board of Central Excise and Customs and to the Secretary (Revenue), Ministry of Finance, Department of Revenue, for consideration.
(See 2014-TIOL-1934-CESTAT-DEL)
