Freight Outward

[NANDA H.L.]

Hi

We have paid Service tax towards Freigh Outward transporation. i.e we have cleared our finsihed products to customer place.  Now service tax paid for the same (Freight outward) shall we avail the service tax credit for the same.  If Yes, plese refer case law for the same.

[YP SOOD]

Hello Nanda ji

As per Rule 2 ( l ) of the  Cenvat Credit Rule, 2004, the ‘input service credit of tax paid on outward transportation expenses’  up to the place of removal only, is eligible. In your case if the place of removal is  the ‘factory gate’ you are not eligible for service tax credit on outward transportation expenses as these  expenses were borne for clearance of goods from the  factory gate upto the customer end.

[NEERAJ KUMAR, RANCHI]

Hi,

if the freight paid on outward transportation is included in the total assessable value,(transaction value) I mean if central excise duty has been paid on the value which includes freight on out ward transportation and place of removal is not factory gate but customer's place you will definitely get the credit of service tax.

[YP SOOD]

Hi,

As per section 4(3)(c) of the CE Act,1944,the term "Place of removal" means;

i. a factory or any other place or premises of production or manufacture of the excisable goods;

ii. a warehouse or any other place or premises wherein the excisable goods have been permitted to be deposited without payment of duty, 

iii. a depot, premises of a consignment agent or any other place or premises from where excisable goods are to be sold after their clearance from the factory.

from where such goods are removed;

So as per the facts transpiring from your case .....Since the place at which customers receives goods finally  can not be termed as "place of removal" so in terms of  Rule 2(l) of the  Cenvat Credit Rule, 2004 read with the provisions under section 4(3)(c) of the CE Act,1944 the credits of ST paid on outward freight should not be admissible.

Moreover the law is very clear . If the central excise duty has been paid on the basis of valuation of goods in terms of section 4 of the CE Act,1944  the Service tax is not leviable. As per the Boards circular ,the tax paid  on volition is not eligible for credit.

Thanks

AI Summary

Cenvat credit on outward freight depends on place of removal; factory gate removal generally precludes credit for beyond-gate transport. Cenvat credit for service tax on outward transportation is available only for transport up to the place of removal; where the place of removal is the factory gate, service tax on freight beyond that point is not creditable. If outward freight is included in the transaction value and excise duty has been paid on that value, credit treatment may change and service tax may not be leviable, with tax paid on valuation-driven components generally excluded from credit by departmental guidance.