CENVAT credit on GTA outward freight for FOR destination goods to customs premises allowed for 2013-2017

The dominant issue was whether CENVAT credit was admissible on service tax paid on GTA services used for outward transportation of goods during 2013-14 to June 2017. Applying its prior rulings that outward transportation on FOR destination basis qualifies as an input service, and that credit is available where freight forms part of the assessable value up to the place of removal, the Tribunal held that credit on outward transportation to customs premises was permissible. Consequently, the departmental challenge to the allowance of CENVAT credit was rejected, and the appeal was dismissed.

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1. ISSUES PRESENTED AND CONSIDERED

(i) Whether CENVAT credit was admissible on service tax paid for outward transportation of finished goods where sales were on FOR destination basis and freight was included in the assessable value on which duty was paid.

(ii) Whether the adjudicating authority's finding that delivery and transfer effectively occurred at the buyer's doorstep (and not at the factory gate), based on contractual terms and invoicing/valuation practice, justified treating outward transportation as eligible input service for CENVAT credit during the relevant period.

2. ISSUE-WISE DETAILED ANALYSIS

Issue (i) & (ii): Admissibility of CENVAT credit on outward transportation under FOR destination contracts

Legal framework (as discussed/applied by the Court): The Tribunal treated eligibility of credit on outward transportation as turning on whether, under FOR destination sales, the customer's premises could be regarded as the effective place up to which responsibility for delivery continued, thereby making the outward transportation integrally connected with the sale and clearance. The adjudicating authority also relied on a Board circular dated 08.06.2018 (as applied to the facts) supporting credit availability in such circumstances.

Interpretation and reasoning: The Tribunal affirmed the adjudicating authority's core factual inference that inclusion of transportation cost in the assessable value and payment of duty on that enhanced value was strong evidence that the goods were to be delivered at the buyer's doorstep under the contractual terms. The Tribunal accepted that, if the place of removal were at the factory gate, there would be no requirement to include freight in the assessable value in the manner shown by the invoices relied upon by the adjudicating authority. The Tribunal further held that the matter was covered by its decision in Mangalam Cement, which upheld credit on outward transportation where sales were on FOR destination basis and the seller remained responsible for delivery up to the buyer's premises; accordingly, the Principal Commissioner's approach was consistent with the Tribunal's settled view on the point.

Conclusions: The Tribunal held that there was no illegality in allowing CENVAT credit of the service tax paid on outward transportation for the relevant period where the assessee sold on FOR destination basis and included freight in assessable value while discharging duty. The departmental appeal was dismissed.

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