CENVAT credit allowed for godown rent and security services during goods transit to buyer premises

CESTAT Ahmedabad allowed the appeal regarding CENVAT credit eligibility for input services. The case involved service tax on godown rent and security personnel for tyre storage during transit from factory to OEM premises. The tribunal held that since sale completion occurred only upon delivery at buyer's premises, and appellant was obligated to deliver goods there, all expenses until delivery were included in excisable goods' sale value. Therefore, services related to storage and security during transit qualified as eligible input services for CENVAT credit purposes. The impugned orders were set aside.

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Issues:
Whether post manufacture and clearance from the factory, service tax on godown rent and security personnel during transit to OEM premises is an eligible input service.

Analysis:
The Appellant, engaged in manufacturing automotive tyres, cleared goods to OEMs. The issue is whether service tax on godown rent and security personnel during transit to OEM premises is an eligible input service. The Appellant argued that expenses up to delivery at the customer's place are part of the service up to the place of removal, citing various judgments in their favor. The Revenue contended that expenses beyond the factory gate are not eligible for credit, relying on different judgments.

The Tribunal examined the terms of the supply contract, which indicated that the sale of goods is on FOR basis, with the sale completing only at the buyer's premises. The contract specified delivery at the OEM's factory premises, with ownership transferring only upon delivery. The Adjudicating Authority also noted that the sale completes at the buyer's premises. The Tribunal concluded that since the sale completes only at the buyer's premises, expenses up to delivery are included in the excisable goods' sale value, making such services eligible as input services for credit.

The Tribunal distinguished the judgments cited by the Revenue, noting they were issued before subsequent developments in the law, particularly the decision of the Hon'ble Gujarat High Court in the Sanghi Industries and Ultratech Cement cases. Given the completion of sale at the buyer's premises, the Tribunal set aside the impugned orders and allowed the appeals.

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