Assessee entitled to CENVAT credit on GTA services for outward transportation under rule 2(l) of 2004 Credit Rules

The CESTAT NEW DELHI allowed the appeal regarding CENVAT credit on GTA services for outward transportation. The tribunal held that the assessee was entitled to avail CENVAT credit on service tax paid for GTA services used for transporting goods from factory gate/depot to customer premises on FOR destination basis under rule 2(l) of the 2004 Credit Rules. The decision relied on SC precedents in Ultratech Cement and Roofit Industries, which established that place of removal is determinative for valuation purposes. The Commissioner's order denying the credit was set aside.

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Issues Involved:
1. Recovery of CENVAT credit under rule 14 of the CENVAT Credit Rules 2004.
2. Determination of the 'place of removal' for the purpose of availing CENVAT credit on Goods Transport Agency (GTA) services.
3. Applicability of the Supreme Court judgment in Ultra Tech Cement Ltd. case.
4. Interpretation of the Circular dated 08.06.2018 by the Central Board of Indirect Taxes and Customs.

Issue-wise Detailed Analysis:

1. Recovery of CENVAT credit under rule 14 of the CENVAT Credit Rules 2004:
The appellant, M/s. Prism Johnson Ltd., filed an appeal against the order dated 28.08.2018 passed by the Commissioner for recovery of CENVAT credit amounting to Rs. 3,74,34,023/- under rule 14 of the CENVAT Credit Rules 2004, read with section 11A(10) of the Central Excise Act, 1944, and section 174 of the Central Goods and Service Tax Act, 2017. The reversal of wrongly availed CENVAT credit of Rs. 1,44,03,192/- was appropriated against the confirmed demand.

2. Determination of the 'place of removal' for the purpose of availing CENVAT credit on Goods Transport Agency (GTA) services:
The appellant availed CENVAT credit on inputs, capital goods, and input services, including GTA services for outward transportation of goods on Free on Road (FOR) destination basis. The appellant claimed that the sale took place at the customer's place, bearing the risk of loss during transit. The department, referencing the Supreme Court judgment in Ultra Tech Cement Ltd., directed the appellant to reverse the CENVAT credit availed on GTA services for the period from April 2013 to June 2017, asserting that the 'place of removal' was the factory gate.

3. Applicability of the Supreme Court judgment in Ultra Tech Cement Ltd. case:
The Commissioner upheld the demand based on the Supreme Court judgment in Ultra Tech Cement, which stated that the 'place of removal' would be the factory gate, and thus, CENVAT credit beyond the factory gate was not admissible. The Supreme Court had clarified that after the amendment of rule 2(l) of the 2004 Rules on 01.03.2008, the service is treated as 'input service' only 'upto the place of removal'. The judgment emphasized that the benefit of CENVAT credit terminates at the place of removal.

4. Interpretation of the Circular dated 08.06.2018 by the Central Board of Indirect Taxes and Customs:
The Circular dated 08.06.2018 provided general principles for determining the 'place of removal' and exceptions to these principles. It referred to the Supreme Court judgments in Ispat Industries Ltd. and Roofit Industries Ltd., emphasizing that the 'place of removal' is generally determined with reference to the 'point of sale'. The Circular clarified that for FOR destination sales, where ownership and risk remained with the seller until delivery, the seller could avail CENVAT credit for GTA services.

Conclusion:
The Tribunal in Hindustan Zinc Ltd. vs. Commissioner, Central Excise & CGST Commissionerate, Udaipur, decided in favor of the appellant, holding that CENVAT credit on GTA services availed for outward transportation on FOR destination basis from the factory gate/depot to the customer's premises was admissible under rule 2(l) of the 2004 Credit Rules. The impugned order dated 28.08.2018 by the Commissioner was set aside, and the appeal was allowed. The judgment emphasized that the Supreme Court in Ultra Tech Cement did not lay down principles for ascertaining the 'place of removal' in the context of CENVAT credit on GTA services but only addressed the amendment in rule 2(l) of the 2004 Rules.

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