The Delhi Bench of Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has held that cenvat credit is available on goods transportation upto customer’s premises as it is covered under ‘input service’.
The bench of Binu Tamta (Judicial Member) and P.V. Subba Rao (Technical Member) has observed that the price charged to customers for goods on which central excise duty is paid is inclusive of freight. The Appellant engages transporters for outward transportation of goods and paying freight charges to the transporters. The Appellant also bore the risk of loss/damage during transit till the goods reached the doorstep of the customers. In this regard, the appellant also took transit insurance policy. The appellant also paid service tax under reverse charge mechanism on payment made to transporters and availing credit of the same.
Table of Contents
Background
The issue relates to 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 is engaged in the manufacturing of excisable good namely cement & clinker and have been availing the benefit of cenvat credit facility on service tax paid on freight incurred on ‘outward transportation’ of cement from factory to the customer‘s premises and depot to the customer‘s premises on ‘FOR’ basis destination sales and utilizing it for payment of central excise duty on cement in terms of the Rules, 2004.
The case of the Department was that the appellant is not entitled to avail the cenvat credit of service tax paid on the freight incurred on outward movement of the finished goods, beyond the place of removal i.e. from the factory to the customer‘s premises as the GTA services for outward transportation of goods beyond the ‘place of removal’ is not covered within the ambit of the definition of ‘input service’ for the purpose of availing the cenvat credit.
Case Laws
Commissioner of Customs and Central Excise Vs. Roofit Industries Ltd: Supreme Court
The Apex Court in Commissioner of Customs and Central Excise Vs. Roofit Industries Ltd. laid down the test of determining the place of removal whether it is at the factory gate or at a later point of time when the delivery of goods is affected to the buyer at the premises of the buyer and, therefore, observed that the charges which are to be added have to be up to the stage of transfer of the ownership and once the ownership in goods stands transferred to the buyer, any expenditure incurred, thereafter, has to be on account of the buyer and cannot be a component, which would be included while ascertaining the valuation of goods.
CCE and Service Tax Vs. Ultra Tech Cement Ltd : Supreme Court
The Supreme Court in CCE and Service Tax Vs. Ultra Tech Cement Ltd. once again, examined the admissibility of the Cenvat credit availed on service tax paid for ‘GTA service’ for transport of goods from the place of removal to buyers premises however, the judgement basically dealt with the question whether it can be treated as ‘input service’ and, therefore, considered the change brought about by the amendment made in the definition of ‘input service’ under Rule 2(l) of the 2004 Rules, as it stood prior to the amendment on 01.03.2008.
The principles for ascertaining the ‘place of removal’ were not laid down in the said judgement, however, the appeal filed by the Revenue was allowed.
Conclusion
The tribunal held that the transportation of the goods upto the customer’s premises would also be covered within the definition of ‘input service’.
Case Details
Case Title: M/s.A.C.C. Limited Versus Commissioner of Central Excise & and Central Goods and Service Tax
Case No.: Excise Appeal No.52718 of 2019
Date: 04.11.2024
Counsel For Appellant: Hemant Bajaj
Counsel For Respondent: Rakesh Agarwal
