Cenvat credit on GTA outward transportation for FOR destination sales; tribunal allows credit where freight formed part of sale value

Admissibility of Cenvat credit on service tax paid for GTA outward transportation where sales are on FOR destination basis: because invoices show freight included in sale value and excise discharged on value inclusive of freight, and ownership and risk remain with the seller until delivery, the buyer's premises is the place of removal. Applying the principle in Ultratech and tribunal precedent, GTA service up to the customer's premises qualifies as an input service and credit is allowable. Impugned orders set aside and appeals allowed with consequential relief.

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Issues: Whether Cenvat credit of service tax paid on GTA services for outward transportation of finished goods up to the customer's premises is admissible where sales are on FOR destination basis.

Analysis: Where the sale is on FOR destination basis and contractual terms, invoices and related documents show freight borne by the seller and assessable value inclusive of freight, ownership and risk in the goods remain with the seller until delivery at buyer's premises. Rule 2(l) of the Cenvat Credit Rules, 2004 defines 'input service' and requires assessment of the 'place of removal' to determine admissibility of credit up to that place. Relevant authority and administrative guidance, including tribunal and High Court decisions applying the Supreme Court's guidance in Ultratech Cement Ltd. and subsequent CBEC circulars, direct that in FOR destination contracts the buyer's premises can constitute the place of removal. On these facts, GTA services used to transport goods up to the buyer's premises fall within 'input service' under Rule 2(l) and qualify for Cenvat credit.

Conclusion: Cenvat credit of service tax paid on GTA services for outward transportation up to the customer's premises is admissible where sales are on FOR destination basis and freight is borne by the seller; the appeals are allowed and the impugned orders setting aside such credit are set aside.

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