2013 (10) TMI 1163 - HC - Service Tax

GTA service eligibility for input service credit on the outward freight - entire cost of freight is paid by the manufacturer up to customer s doorstep place of removal - in view of Circular No. 97/6/2007-ST, dated 23-8-2007, credit is admissible if ownership of goods remain with seller till delivery of goods at customer s doorstep since sales is based on basis of FOR destination , transit insurance and freight charges are borne by appellant, so credit is admissible on outward freight - Following decision of Ambuja Cements Ltd vs. Union of India 2009 (2) TMI 50 - PUNJAB & HARYANA HIGH COURT - No substantial question of law arises - Decided against the revenue.

Summary

Issues:
1. Interpretation of Rule 2(l) of Cenvat Credit Rules, 2004 regarding service tax on outward transportation of goods as an input service.

Analysis:

The appeal under Section 35G of the Central Excise Act, 1944 was filed challenging an order by the Central Excise and Service Tax Appellate Tribunal regarding the eligibility of service tax paid on outward transportation of goods as an input service under Rule 2(l) of the Cenvat Credit Rules, 2004. The appellant, a Goods Transport Agency, had availed Cenvat Credit by paying service tax on outward freight charges. The revenue contended that the appellant was not entitled to this credit. A show cause notice was issued, leading to a denial of Cenvat Credit on service tax for outgoing freight. The Commissioner of Central Excise (Appeals) upheld this decision, but the Tribunal allowed the appeal, citing a judgment by the Karnataka High Court.

In the case of Ambuja Cements Ltd vs. Union of India, the Court referred to a circular by the Central Excise Board and Customs, emphasizing that the determination of the "Place of Removal" must consider the specific circumstances of each case. The Court analyzed the definition of "input service" in Rule 2(l) and concluded that for transportation purposes, ownership of goods remains with the seller until delivery to the purchaser. Therefore, transportation charges qualify as an input service for availing credit. The Court highlighted that outward transportation up to the place of removal is considered an "input service."

The judgment emphasized that the place of removal, as per the Board's circular, is a factual determination. If goods are to be delivered to the purchaser, the place of removal is not the factory gate but that of the purchaser. Citing the decision in Ambuja Cement's case, the Court found no evidence of property transfer to the purchaser at the factory door, justifying the Tribunal's decision to allow the appeal. Consequently, the Court dismissed the appeal, stating that no substantial question of law arose for consideration in this matter.