Supreme Court clarifies "place of removal" for credit allowance in FOR destination sales.

The Supreme Court ruled in favor of the appellant, a manufacturer of electrical transformers, regarding the determination of the "place of removal" for credit allowance in the case of delivery to the buyer's premises. The Court emphasized that in FOR destination sales where the seller retains ownership and risk until buyer acceptance, the place of removal should be determined with reference to the point of sale. The appellant's compliance with relevant Circulars and judgments allowed for credit on outward transportation in such deliveries, leading to the invalidation of the show cause notice and granting of consequential benefits.

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Issues:
Determining the "place of removal" for allowance of credit in the case of delivery of finished products from the factory to the buyer's premises.

Analysis:
The appellant, engaged in manufacturing electrical transformers, sought clarification on the "place of removal" for credit allowance concerning delivery to the buyer's premises. The purchase order indicated prices for delivery FOR basis, inclusive of freight up to the buyer's site, with obligations for installation and commissioning at no extra cost. The buyer accepted the transformers post-installation and commissioning. The issue stemmed from litigations post-amendment in Rule 2(l) concerning input service up to the place of removal. The Supreme Court's rulings in various cases, including CCE Vs. M/s. Roofit Industries Ltd., emphasized determining the place of removal with reference to the point of sale, especially in FOR destination sales where seller retains ownership and risk until buyer acceptance. The Board's circular further clarified the application of these principles and exceptions in such cases.

The appellant had taken disputed credit during April-June 2012, duly recorded in their accounts and disclosed in returns. Show cause notices were issued post-audit in Feb. 2017, invoking extended limitation periods. The Department alleged that the credit was taken on outward freight to evade duty payment, claiming the place of removal as the buyer's premises. However, considering the appellant's compliance with Circulars and judgments allowing credit for outward transportation in FOR deliveries where risk in transit is borne by the seller until buyer acceptance, the show cause notice was deemed invalid for invoking extended limitation. The decision was based on legal interpretations and not contumacious conduct or suppression of facts, leading to the appeal's allowance and setting aside of the impugned order, entitling the appellant to consequential benefits.

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