CENVAT credit on outward freight allowed for goods cleared on FOR basis until delivery location

The CESTAT Allahabad allowed the appeal regarding CENVAT credit on outward freight for transportation of final products. The Revenue argued that the place of removal for clearance was the factory gate/depot, not customer premises. However, the tribunal held that when goods are cleared on FOR basis, following Circular No. 1065/4/2018-CX dated 08.06.2018, the place of removal is the delivery location, making CENVAT credit on GTA services admissible until that point. The decision followed precedent from CESTAT Mumbai in a similar case, finding no merit in the Revenue's position.

---

---

Issues involved:
The issues involved in this case are the demand of CENVAT credit, interest, and penalty imposed by the Commissioner of Central Excise on the appellant for availing CENVAT credit on outward freight during a specific period, the admissibility of such credit under the CENVAT Credit Rules, 2004, and the interpretation of the "place of removal" concerning the transportation of goods.

Admissibility of CENVAT Credit on Outward Freight:
The appellant, engaged in manufacturing goods, availed CENVAT credit on service tax paid on outward transportation charges for the period from August 2008 to March 2012. The issue revolved around whether the outward freight, paid for transporting final products to customers, qualifies as an "input service" under the CENVAT Credit Rules, 2004. The Commissioner contended that the place of removal for the goods is the factory gate/depot, not the customers' premises, making the service tax on outward freight inadmissible as CENVAT credit. A show cause notice was issued to the appellant, leading to the impugned order confirming the demand of CENVAT credit, interest, and penalty.

Interpretation of "Place of Removal" and Legal Precedents:
The Commissioner observed that the appellant's sales were on a "FOR basis," where ownership transferred to the buyer at the destination. Referring to legal precedents and circulars, including those by the Hon'ble Supreme Court, the Commissioner concluded that the place of removal for goods sold on a FOR basis is the place of delivery to the buyer, allowing the admissibility of CENVAT credit on services of Goods Transport Agency (GTA) till that point. The Mumbai bench's decision in M/s CEAT Ltd further supported this interpretation, leading to the allowance of the appeal against the impugned order.

Conclusion:
The Appellate Tribunal, CESTAT ALLAHABAD, allowed the appeal, disagreeing with the Commissioner's findings on the admissibility of CENVAT credit on outward freight. The Tribunal's decision aligned with legal interpretations regarding the "place of removal" in cases of sales on a FOR basis, supported by relevant circulars and judicial precedents. The appellant's entitlement to CENVAT credit on GTA services till the place of delivery was upheld, emphasizing the significance of the point of sale in determining the place of removal for excisable goods.

---