Clarification on Service Tax Credit for Outward Transportation

The judgment clarified that the admissibility of input credit of service tax paid on outward transportation of goods is determined by the place of removal. The Commissioner's decision to grant Cenvat credit was upheld, as the goods were under the appellant's control until delivery to the consignee. The Tribunal rejected the Revenue's appeal, citing a High Court decision allowing credit for transportation up to the place of sale, which aligned with the FOR destination basis of the sale in this case. The ruling reaffirmed the importance of considering the terms of supply and legal precedents in determining input credit eligibility for service tax on outward transportation.

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Issues involved:
Admissibility of input credit of service tax paid on outward transportation of goods.

Analysis:
The judgment deals with the issue of the admissibility of input credit of service tax paid on the outward transportation of goods from the factory gate to the place of removal. The Commissioner (Appeals) granted relief to the respondent based on the determination of the place of removal as per the definition. The Commissioner observed that the goods remained in the control of the appellant until delivered to the consignee at their door step, as per the terms of supply on F.O.R. destination basis. The transaction value in some invoices was shown on F.O.R. basis, with transportation charges forming part of the assessable value. The Commissioner concluded that the appellant rightfully availed Cenvat credit of the service tax paid on outward GTA service.

The Revenue contended in their appeal that the place of removal for all purposes is the factory gate, and hence, service tax paid on transportation from the factory gate onwards is not admissible as input credit. However, the Tribunal referred to a decision of the Hon'ble High Court of Karnataka in the case of CCE & ST v. ABB Ltd., where it was held that credit of service tax paid on transportation up to the place of sale is admissible. Since the sale in the present case was on FOR destination basis, the Tribunal found no merit in the Revenue's appeal and rejected it based on the precedent set by the Hon'ble High Court's decision.

In conclusion, the judgment clarifies that the admissibility of input credit of service tax paid on outward transportation of goods is determined by the place of removal, as per the terms of supply and the applicable legal precedents. The decision emphasizes that when the sale is on FOR destination basis, the credit of service tax paid on transportation up to the place of sale is admissible, following the established legal principles and interpretations.

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