2013 (8) TMI 719 - AT - Central Excise

Interpreting 'Place of Removal' for Cenvat Credit: Tribunal Ruling Clarifies Input Services Eligibility

AARTI STEEL LTD. Versus COMMISSIONER OF CENTRAL EXCISE, LUDHIANA

The Tribunal held that if sales are on FOR destination basis, transportation up to customer premises qualifies as an 'input service' eligible for Cenvat ... CENVAT credit – GTA Service on Outward Transportation - upto the place of removal - Definition of Input Service - The appellant availed the Cenvat credit of Central Excise Duty paid on inputs and capital goods and service tax paid on inputs services used in or in relation to the manufacture of their final products - Whether the appellant were eligible for Cenvat credit of service tax paid on GTA Service availed for outward transportation of finished goods from the factory gate to the customer’s premises – Held that:- Cenvat credit of service tax paid on outward freight up to the buyer’s premises would be admissible when the sales were on FOR destination satisfying the criteria prescribed for the same in the Board’s Circular 23-8-2007 - their sales were on FOR destination basis and it was the customer’s premises which would be the place of removal and since during the period of dispute, transportation up to the place of removal was covered by the definition of ‘inputs service’. Ambuja Cement Limited v. Union of India [2009 (2) TMI 50 - PUNJAB & HARYANA HIGH COURT] - They would be entitled for the Cenvat credit of service tax paid on the GTA service availed for outward transportation of the finished goods up to the customer’s premises - the duty on the finished goods was at an ad valorem rate, the definition of ‘place of removal’ as given in Section 4 of the Central Excise Act, 1944, would be applicable and accordingly if the sales, of the goods take place at the customer’s premises i.e. the sales are on FOR destination basis, the customer’s premises would be the “place of removal” - the transportation of the finished goods upto customer’s premises would be covered by the definition of ‘input service’. In the orders neither any findings had been given on the appellant’s plea that their sales were on FOR destination basis nor the Board’s Circular No. 97/6/2007-S.T., dated 23-8-2007 and the judgments of Hon’ble Punjab & Haryana High Court in case of Ambuja Cement Ltd. which was the jurisdictional High Court had been discussed - Order set aside - Matter Remanded back to CCE (Appeals) for de novo decision – Decided in favor of assesse. Issues:- Eligibility of Cenvat credit for service tax paid on GTA Service for outward transportation of finished goods.- Interpretation of 'place of removal' in the context of Cenvat credit rules.- Applicability of Board's Circular on FOR destination basis sales.- Comparison of judgments by different High Courts on Cenvat credit eligibility.Issue 1: Eligibility of Cenvat credit for service tax paid on GTA Service for outward transportation of finished goods:The appellant, engaged in manufacturing steel products, claimed Cenvat credit for service tax paid on outward transportation of finished goods to customer premises. The Department disputed this claim, arguing that GTA service for such transportation does not qualify as an 'input service' under Cenvat Credit Rules. The Commissioner (Appeals) upheld the denial of credit, emphasizing that transportation arranged by the manufacturer on customer's request does not make customer premises the 'place of removal.' The appellant contended that their sales were on FOR destination basis, making customer premises the 'place of removal,' citing relevant High Court judgments. The Tribunal noted that if sales are on FOR destination basis, transportation up to customer premises qualifies as an 'input service' eligible for Cenvat credit.Issue 2: Interpretation of 'place of removal' in the context of Cenvat credit rules:The Tribunal analyzed the definition of 'place of removal' under the Central Excise Act, emphasizing that if sales occur at customer premises on FOR destination basis, it constitutes the 'place of removal.' The Board's Circular specified criteria for FOR destination sales, including ownership retention by manufacturer-seller during transit, risk of loss on manufacturer-seller, and integral transport charges in goods value. The Tribunal referred to the Hon'ble Punjab & Haryana High Court's decision, which allowed Cenvat credit for service tax on outward transportation up to buyer's premises for FOR destination sales meeting Circular criteria.Issue 3: Applicability of Board's Circular on FOR destination basis sales:The Tribunal discussed the importance of adhering to the Board's Circular for treating sales as FOR destination basis. Relying on the Circular's criteria, the Tribunal reiterated that if sales meet the specified conditions, customer premises become the 'place of removal,' allowing Cenvat credit for service tax on transportation up to that point. The Tribunal emphasized the necessity of satisfying Circular requirements for eligibility of Cenvat credit on GTA services for outward transportation.Issue 4: Comparison of judgments by different High Courts on Cenvat credit eligibility:The Tribunal compared judgments by various High Courts on Cenvat credit eligibility for outward transportation services. While the Larger Bench's decision considered such services as 'input services,' the Hon'ble Karnataka High Court's judgment restricted the definition of 'input service' to exclude outward transportation. The Tribunal aligned with the latter's interpretation, emphasizing that Cenvat credit eligibility hinges on sales being FOR destination basis and duty paid at ad valorem rate. The Tribunal set aside the impugned orders, directing a fresh decision considering the criteria outlined in the Circular and relevant High Court judgments.