Goods Transport Agency services qualify for service tax credit under Cenvat Credit Rules when sold on Free on Road basis

The CESTAT NEW DELHI allowed the appeal regarding admissibility of service tax credit for Goods Transport Agency services. The appellant sold products on Free on Road destination basis, paying excise duty including freight. Evidence showed place of removal was customer premises, with ownership transferring upon delivery and appellant bearing transit risks. The Tribunal relied on AMBUJA CEMENTS LTD. precedent and Circular No.1065/4/2018-CX dated 08.06.2018, concluding transportation to customer premises qualified as input service under Cenvat Credit Rules, 2004. The impugned order was set aside as unsustainable.

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Issues:
Admissibility of credit of service tax paid on Goods Transport Agency Service (GTA) for outward transportation of goods on Free on Road (FOR) destination basis.

Detailed Analysis:

Issue 1:
The issue involves the admissibility of credit of service tax paid on GTA service for outward transportation of goods on FOR destination basis under Rule 2(l) of the Cenvat Credit Rules, 2004.

Analysis:
The Apex Court in various decisions, including Commissioner of Customs and Central Excise Vs. Roofit Industries Ltd. and Commissioner of Central Excise Vs. M/s. EMCO Ltd., laid down the test of determining the place of removal in such cases. The judgments emphasized that charges up to the transfer of ownership are to be considered, and any expenditure incurred after the transfer of ownership belongs to the buyer. Subsequent decisions, such as CCE and Service Tax Vs. Ultra Tech Cement Ltd., dealt with the admissibility of Cenvat credit on GTA service for transport of goods to the buyer's premises. The issue of 'place of removal' was crucial in determining the admissibility of credit.

Issue 2:
Interpretation of legal principles regarding 'place of removal' in the context of FOR destination sales.

Analysis:
The Larger Bench of the Tribunal, in reference to various judgments and circulars, concluded that in FOR destination sales, the place of removal is considered to be the buyer's premises. This principle was reiterated in subsequent decisions, including M/s. Sweety Industries, where the appellant was entitled to avail Cenvat credit on outward GTA service for transportation to the buyer's depot.

Issue 3:
Examination of the appellant's eligibility to claim Cenvat credit on service tax paid for outward transportation of goods on FOR destination basis.

Analysis:
The appellant, engaged in manufacturing cement and clinker, availed Cenvat credit on service tax paid on freight for outward transportation on FOR basis. The Department contended that credit beyond the place of removal was not admissible. However, evidence presented by the appellant, including sales documents and invoices, supported that the place of removal was the customer's premises. The appellant bore the risk of loss during transit, and the freight charges were integral to the price of goods.

Conclusion:
Considering the legal principles established in previous judgments, circulars, and the appellant's evidence, the Tribunal held that the impugned order was unsustainable, and the appellant was eligible to claim Cenvat credit on service tax paid for outward transportation of goods on FOR destination basis. The appeal was allowed, setting aside the previous order.

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