The Kerala High Court has held that the CENVAT credit on GTA services (Goods Transport Agency) being available only in respect of services availed up to the place of removal and not beyond it.
The bench of Justice A.K.Jayasankaran Nambiar and Justice Syam Kumar V.M. has observed that the appellant did not include the transportation costs in the assessable value of the goods for the purposes of payment of Central Excise duty.
“We fail to see how the appellant can claim input tax credit in respect of the transportation services availed by it for the purposes of transporting the goods from the place of removal to the buyer’s premises,” the bench said.
Table of Contents
Background
The appellant/assessee is engaged in the manufacture and sale of electrical transformers and allied products falling under Chapter 85 of the Central Excise Tariff Act, 1985. During the period between 01.04.2012 and 28.02.2015, it had entered into contracts with various customers for the supply, installation at site and commissioning of transformers manufactured by it.
The terms and conditions of the contracts entered into with the customers clearly indicated that the contracts were to be on FOR basis whereby the obligation to transport the goods from the place of manufacture to the buyer’s premises was on the appellant. As a matter of fact, in connection with the said contract, the appellant had also separately taken out transit insurance for the goods, and the charges incurred therefore, together with the freight charges, were collected from the customers along with the price of the goods.
Although it was the case of the appellant that the sale of the goods under the contracts was concluded only at the buyer’s premises, since the contract also provided for an inspection clause that mandated that the buyer was obliged to receive the goods only if, after inspection, he was satisfied with the same, the appellant did not include the charges incurred for freight and insurance in the assessable value of the goods for the purposes of payment of Central Excise duty.
Thus, although it was the case of the appellant that the sales of the goods covered under the aforementioned contracts were completed only at the buyer’s premises, the charges incurred by the appellant subsequent to the clearance of the goods from the factory gate were not included by it for the purposes of payment of Central Excise duty.
Conclusion – CENVAT Credit On GTA Services
The court held that permitting the appellant to avail input tax credit would militate against the very Scheme of CENVAT credit, which is designed to avoid the cascading effect of tax and an ultimate burden on a consumer.
The court dismissed the appeals.
Case Details
Case Title: TRANSFORMERS AND ELECTRICALS KERALA LTD. v/s THE COMMISSIONER OF CENTRAL TAX AND CENTRAL EXCISE CENTRAL REVENUE BUILDING
Citation: C.E.APPEAL.NO.17 OF 2019
Date of Decision: 09/10/2024
