Goods Transport Agency services qualify for input service credit when sold on FOR destination basis

CESTAT NEW DELHI allowed the appeal regarding admissibility of input service credit for Goods Transport Agency services. The appellant sold products on FOR destination basis, bearing freight charges for outward transportation from factory to customer premises. The tribunal found that since ownership transferred at customer premises, transportation charges were included in the excise-inclusive price, and the appellant bore transit risks and insurance costs. Following the Punjab Haryana HC precedent in Ambuja Cements Ltd., the tribunal held that outward transportation to customer premises constitutes input service, making credit admissible. The impugned order was set aside.

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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.

Analysis:
The issue in question pertains to the admissibility of Cenvat credit on service tax paid for GTA service utilized for outward transportation of goods on FOR destination basis. The Tribunal referred to various judicial precedents to determine the place of removal in such transactions. The Apex Court's decisions in Commissioner of Customs and Central Excise Vs. Roofit Industries Ltd. and Commissioner of Central Excise Vs. M/s.EMCO Ltd. emphasized that the charges up to the transfer of ownership should be considered, and any expenses incurred after the transfer are the buyer's responsibility. Subsequently, the Supreme Court in CCE and Service Tax Vs. Ultra Tech Cement Ltd. examined the admissibility of Cenvat credit for GTA services, focusing on whether it qualifies as an "input service." The Tribunal also considered decisions from different High Courts and the Karnataka High Court's ruling in Bharat Fritz Werner Ltd. case, allowing credit based on the place of removal being the buyer's premises.

The Larger Bench of the Tribunal, in the case of M/s. Sweety Industries, reiterated that Cenvat credit can be availed on service tax paid for outward GTA service from the factory to the buyer's depot. Following this principle, Co-ordinate Benches of the Tribunal, in cases like M/s.Hindustan Zinc Ltd. and M/s. Prism Johnson Ltd., decided in favor of the assessee, allowing them to claim Cenvat credit for GTA services up to the buyer's premises in FOR destination sales. The legal principles established through these decisions confirm that in FOR destination sales, the buyer's premises constitute the place of removal, making the appellant eligible to claim Cenvat credit.

The Tribunal examined the facts of the present case, where the appellant, engaged in manufacturing cement and clinker, availed Cenvat credit on service tax paid for outward transportation on FOR basis. The Department contended that the credit beyond the place of removal is not admissible, while the appellant relied on precedents to support their claim. It was noted that the appellant sold goods on FOR destination basis, with the place of removal being the customer's premises where ownership transferred. The appellant bore freight charges, risk of loss during transit, and paid service tax under reverse charge mechanism, further supporting their eligibility for Cenvat credit.

The Tribunal referenced a previous decision of the High Court of Punjab & Haryana, which considered Circular No.97/8/2007 and ruled in favor of the appellant, stating that transportation of goods up to the customer's premises falls within the definition of "input service." Despite subsequent amendments to the definition of input service, the Tribunal found that the appellant's case aligns with Circular No.1065/4/2018-CX and previous interpretations, leading to the conclusion that the impugned order denying Cenvat credit is unsustainable. Consequently, the appeal was allowed, and the order was set aside on 4th November 2024.

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