service tax on freight and cenvat credit thereon

[RAM SHARMA]

Dear Experts,

We are selling our goods through consignment agent and bear all the expenses like freight and commission. We are availing cenvat credit on freight and commission up to place of removal means up to consignment agent godown. By doing this, we are paying excise duty on such freight and commission because our price is inclusive of freight and commission. Now, we want freight should be bear by our consignment agent and take service tax credit theron. Further we want to given discount on invoice in place of commission. By doing this, we can save excise duty on such freight and commission. What will be the legal implication by implement this procedure. Please suggest.

Thanks & Regards

[KASTURI SETHI]

Dear Querist,. Your place of removal is Godown/Depot. You will have to include the element of freight from factory gate to deposit for the purpose of payment of Central Excise duty.

[KASTURI SETHI]

Discount is always given to customer. Consignment agent is not your customer. He is your agent. There is a world of difference between discount and commission.

[RAM SHARMA]

Dear Experts,

If we convert our consignment agent into dealer then it is possible. Please suggest.

Thanks

[Ganeshan Kalyani]

Then entire transaction would be taxable. As of now it is stock transfer and no taxable.

[RAM SHARMA]

When we will convert our agent into dealer then my dealer can take service tax credit on such freight.

Thanks

[YAGAY and SUN]

Availment of CENVAT credit on freight is subject to the definition of Input Tax Credit and Ciruclars, Latest Judgements as amended/notified/provided from time to time in CENVAT credit Rules etc.

[KASTURI SETHI]

Dear Querist,

After going through all the replies and cross queries raised by you, first and most important aspect in this scenario is to determine place of removal.

[RAM SHARMA]

Dear Sir,

When we will convert our consignment agent into our dealer then place of removal will be our factory and freight will be born by our dealer. We are doing all exercise in view of upcoming GST and cost of benefit.

Thanks & Regards

[KASTURI SETHI]

Sh. Ram Sharma ji,

I concur with you. I appreciate your vision.

[RAM SHARMA]

Thanks for your appreciation Sir.

AI Summary

Place of removal determines inclusion of freight in assessable value, affecting excise duty and cenvat credit eligibility.
In consignment sales the place of removal controls whether freight and commission from factory gate to the agent's depot are included in the excise assessable value and whether cenvat credit may be availed. A consignment agent is an agent, not a customer, so discounts and commissions are distinct; converting the agent into a dealer shifts the place of removal to the factory, alters the transaction from stock transfer to taxable sale, may make the dealer responsible for freight, and could permit service tax credit on freight, subject to input credit rules and legal developments.