Cenvat Credit Allowable On Service Tax : CESTAT

In a major relief to Ambuja Cement, the Delhi Bench of Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has allowed the cenvat credit on service tax paid on Goods Transport Agency Services (GTA Services) for outward transportation of cement.

The bench of Binu Tamta (Judicial Member) and P.V. Subba Rao (Technical Member) has observed that the cement is sold on FOR basis as per the allegations made in the show cause notice. Once the sale is on (FOR) destination basis, the ownership in the goods gets transferred only at the customer’s premises.

Background – Cenvat Credit Allowable On Service Tax To Ambuja Cement

The appellant/assessee has challenged the order relating to the admissibility of credit of service tax paid on “Goods Transport Agency Service” availed by the appellant for outward transportation of goods on Free on Road destination basis from the factory gate or depot of the appellant to the premises of the customers under Rule 2 (l) of the Cenvat Credit Rules, 2004.

The appellant/assesee is in the business of manufacturing ‘cement and clinker’ and has been availing cenvat credit on inputs, capital goods and input services under the CCR, 2004. The appellant sells the final product i.e. cement to the customers on FOR destination basis.

A Show cause notice was issued to the appellant for the period April, 2016 to June, 2017 alleging that the cenvat credit in respect of “GTA services for outward transportation of cement from factory to the customer’s premises or from depot to the customer‟s premises on FOR destination basis has resulted in contravention of the provisions of Rule 2 and Rule 3(1) of the Rules, 2004 read with Section 4(3)(c)(iii) of the Central Excise Act.

On adjudication, the entire cenvat credit was disallowed and the same has been affirmed by the Commissioner (Appeals) by the order.

Conclusion

The tribunal while allowing the appeal held that in a case where clearances of goods are against FOR contract basis, the authority needs to ascertain the ‘place of removal’.