2014 (2) TMI 1189 - AT - Service Tax

Denial of CENVAT Credit - transportation of goods - whether Cenvat credit of Service Tax can be taken for the outward freight for excisable goods delivered by the appellants at the premises of their buyer M/s. Mahindra and Mahindra - Held that - Where the place of delivery of the goods is the customer premises and the freight is borne by the manufacturer, the place of removal has to be held as the customer s factory gate. I find that the Board has also clarified the issue vide Circular No. F/137/85/2007-CX-IV, dated 23-8-2007. Even after the amendment of the definition of input services with effect from 1-4-2008, replacing the words from the place of removal to up to the removal , the place of removal get extended up to the buyers premises in case of FOR sales and as such the said amendment would not made any difference, where the sales are on FOR basis. - In the case of FOR destination sales, the ownership and risk is transferred when the seller manufacturer delivers the goods to the buyer at his premises. As such, I find no reasons to deny the Cenvat credit of Service Tax paid on the transportation of goods. - Decided in favour of assessee.

Summary

Issues:
1. Whether Cenvat credit of Service Tax can be taken for outward freight for excisable goods delivered to the buyer's premises?

Analysis:

The judgment revolves around the issue of whether Cenvat credit of Service Tax can be claimed for the outward freight of excisable goods delivered to the buyer's premises. The period in question is November 2009 to March 2010. The appellant's argument is based on paying Excise duty on the value inclusive of freight, as the contract was for supplying goods at the destination on FOR destination basis. However, lower authorities ruled against the appellant, citing the lack of evidence regarding insurance for goods during transportation. The appellant relied on the decision of Ambuja Cement v. CCE to support their claim for Cenvat credit. It was highlighted that the risk in the goods remained with the appellant until delivery to the buyer's premises, regardless of insurance coverage, as per the business decision taken by the seller.

The judgment further delves into the interpretation of the issue based on legal precedents. Referring to the decision of the Hon'ble Punjab & Haryana High Court in the case of M/s. Gujarat Ambuja Cement Ltd., it was established that when the place of delivery is the customer's premises and the manufacturer bears the freight, the place of removal is considered the customer's factory gate. The Board's circular from 2007 also clarified this aspect. Even after the amendment in the definition of "input services" in 2008, the place of removal extends up to the buyer's premises in FOR sales, maintaining the transfer of ownership and risk at the buyer's premises as per the Sale of Goods Act, 1932. Consequently, the judgment concluded that in FOR destination sales, the ownership and risk transfer occur upon delivery to the buyer's premises, justifying the allowance of Cenvat credit for Service Tax on transportation of goods. As a result, the impugned orders were set aside, and the appeal was allowed with consequential relief for the appellant.