CENVAT credit allowed for GTA services on outward freight for FOR basis supplies after 2008 rule amendment

CESTAT Allahabad allowed the appeal regarding CENVAT credit for GTA services on outward freight for goods cleared on FOR basis during 2012-13 to 2016-17. The tribunal noted that while initial denial was based on SC decision in Ultratech Cement Ltd case, Board Circular No.1065/4/2018-CX dated 08.06.2018 clarified that after amendment to Rule 2(l) of CENVAT Credit Rules 2004 effective from 01.03.2008, GTA services are treated as input services up to place of removal. Since supplies were made on FOR basis with duty value determined accordingly, CENVAT credit for GTA services was held admissible.

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Issues Involved:

1. Eligibility for Cenvat credit on outward freight for transportation of goods to customer premises on FOR basis.
2. Interpretation of "place of removal" in the context of Cenvat credit eligibility.
3. Impact of Supreme Court judgments and CBEC Circulars on the eligibility of Cenvat credit for Goods Transport Agency services.

Issue-wise Detailed Analysis:

1. Eligibility for Cenvat Credit on Outward Freight:

The core issue in this case revolves around the eligibility of M/s Dalla Cement Factory for availing Cenvat credit on Goods Transport Agency (GTA) services for outward freight, specifically for transportation of goods to customer premises on a Free on Road (FOR) basis. The Commissioner of Central Excise & CGST, Varanasi, in the impugned order, denied the Cenvat credit amounting to Rs.14,89,613/- for the period 2012-13 to 2016-17, citing that the credit availed on outward freight does not qualify as input service under Rule 2(l) of the Cenvat Credit Rules, 2004. The appeal challenges this denial, arguing that the supplies were made on an FOR basis, which should allow for the Cenvat credit on the GTA services used.

2. Interpretation of "Place of Removal":

The determination of the "place of removal" is crucial in deciding the eligibility for Cenvat credit on outward freight. The original definition of "input service" included services used for the clearance of final products "from the place of removal." However, post-amendment in 2008, the definition was altered to include services only "up to the place of removal." This change significantly impacts the eligibility for credit on outward transportation. The Supreme Court in the case of Commissioner of Central Excise and S.T. vs. Ultratech Cement Ltd. clarified that post-amendment, services used for transportation beyond the place of removal are not eligible for Cenvat credit. The Tribunal, however, noted that supplies made on an FOR basis, where the seller retains ownership and risk until delivery, could still be eligible for credit, as clarified in subsequent CBEC Circulars.

3. Impact of Supreme Court Judgments and CBEC Circulars:

The Tribunal heavily relied on the Supreme Court's judgment in Ultratech Cement Ltd., which held that Cenvat credit on GTA services for transportation from the place of removal to the buyer's premises is not admissible post the 2008 amendment. However, the Tribunal also considered the CBEC Circular No.1065/4/2018-CX, which provided exceptions for FOR destination sales. The Circular clarified that in cases where the contract is on an FOR basis, and the seller retains ownership and risk until delivery, Cenvat credit on GTA services is admissible. This interpretation aligns with the Tribunal's findings in similar cases like M/s CEAT Ltd. and M/s Hindustan Zinc Ltd., where credit was allowed under similar circumstances.

Conclusion:

The Tribunal concluded that the supplies in the present case were made on an FOR basis, which entitles the appellant to avail Cenvat credit on the GTA services for outward freight. The appeal was allowed, setting aside the impugned order, and confirming the eligibility of Cenvat credit in such cases. This decision underscores the importance of contract terms and ownership risk in determining the place of removal and eligibility for Cenvat credit.

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