2024 (10) TMI 144 - AT - Central Excise

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

M/s. A.C.C. Limited Versus Commissioner of Central Goods and Service Tax, Central Excise, Bhopal

The CESTAT NEW DELHI allowed the appeal regarding admissibility of service tax credit for Goods Transport Agency services. The appellant sold products on ... Admissibility of credit of service tax paid - input service - place of removal - Goods Transport Agency Service [GTA] availed by the appellant for outward transportation of goods on Free on Road [FOR] destination basis from the factory gate or depot of the appellant to the premises of the customers - Rule 2 (l) of the Cenvat Credit Rules, 2004 - HELD THAT:- The appellant was selling their final products on FOR destination price and has paid the excise duty, which includes the freight also. The evidence placed by the appellant regarding FOR destination sales included the Marketing Circulars, Sales Contract/Agreement, Excise Invoice, Commercial Invoice, Lorry Receipts, Transporter’s Bills, Payment Details and Copies of the TR-6 Challans, etc. The invoices supported the submission that the ‘place of removal’ is customer’s premises and the same has been admitted by the Revenue in the show cause notice itself. The functioning of the appellant was to the effect that the customer was charged only for the quantities received by them and in that regard, the transporter appointed by the appellant used to get the acknowledgement copy of the lorry receipts for having delivered the goods to the customers, therefore, the customer pays only for the quantity, which is actually received by him. This shows that the ownership of the goods was transferred at the customer’s premises and the appellant bore the risk of loss or damage to the goods during the transit to the destination till the goods finally reaches to the customer’s door step. The High Court in AMBUJA CEMENTS LTD. VERSUS UNION OF INDIA [2009 (2) TMI 50 - PUNJAB & HARYANA HIGH COURT], therefore, decided in favour of the appellant that the transportation of the goods upto the customer’s premises would also be covered within the definition of “input service”. No doubt, the said order of the Tribunal was passed when the Circular dated 23.08.2007 was in vogue and the definition of “input service” had been subsequently amended w.e.f. 1.3.2008. However, the final conclusion would remain the same in the present appeal in the light of the subsequent Circular No.1065/4/2018-CX dated 08.06.2018. The impugned order is un-sustainable and needs to be set aside - Appeal allowed. 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.