2015 (11) TMI 706 - AT - Central Excise

Denial of CENVAT Credit - whether, outward freight charges paid by the appellant for transportation of goods to its buyers premises should be considered as input service , defined under Rule 2(l) of the Cenvat Credit Rules, 2004 and whether service tax paid on the freight charges is admissible to the appellant as cenvat credit - Held that - Invoices issued by the appellant clearly depict that the freight has been separately charged in the said invoices which is forming the part of overall sale price and also the certificates issued by the buyer of the goods by the practicing Chartered Accountant, clearly demonstrate that the ownership of the goods remained with the seller (appellant herein) till the same is delivered at the buyer s end. Since the certificates were issued upon proper verification of the records/ documents, the same have the evidentiary value. Further the documents available in the file transpire that the appellant borne the risk or loss or damage to the goods during transit to the destination and also the freight charges mentioned in the invoices issued by the appellant were an integral part of the price of goods. Since, the conditions enumerated in the Circular dated 23.08.2007 have been duly complied with by the appellant, I am of the considered view that the freight charges incurred for transportation of goods up to the buyers premises should be considered as input service after amendment of the provisions of Rule 2(l) w.e.f. 01.04.2008 - principles enunciated are that outward transportation service utilized by the manufacturer for transportation of finished goods from the place of removal up to the premises of the purchaser is covered within the definition of input service. - Impugned order is set aside - Decided in favour of assessee.

Summary

Issues:
1. Denial of cenvat credit on service tax paid for safe transportation of goods.
2. Compliance with Circular No. 97/08/2007-ST for place of removal.
3. Eligibility of outward freight charges as "input service" under Cenvat Credit Rules, 2004.
4. Interpretation of the definition of input service pre and post-amendment.
5. Applicability of CBEC Circular and relevant case laws on the issue.

Analysis:
1. The appellant, engaged in manufacturing aluminum foils, appealed against the denial of cenvat credit on service tax paid for freight charges to transport goods to buyers' premises. The Commissioner (Appeals) upheld the denial citing non-compliance with Circular No. 97/08/2007-ST.

2. The appellant argued that ownership of goods remained with them until delivery at the buyer's site, supported by certificates from buyers and a Chartered Accountant. The appellant contended that freight charges were integral to the goods' price, relying on relevant case laws and the Circular to establish eligibility for cenvat credit.

3. The Tribunal considered whether outward freight charges could be deemed "input service" under Rule 2(l) of the Cenvat Credit Rules, 2004. The definition includes the phrase "clearance of final product from the place of removal," which was later amended to include "upto the place of removal" post-April 2008.

4. Pre-amendment, the Tribunal found that service tax on outward freight was eligible as input service, as the ownership and risk of goods remained with the seller until delivery at the buyer's site. Post-amendment, compliance with the Circular was crucial, which the appellant satisfied by demonstrating ownership, risk-bearing, and integral freight charges.

5. The Tribunal concluded that the appellant met the conditions outlined in the Circular and relevant case laws, allowing the freight charges for transportation to buyers' premises to be considered as input service. The impugned orders were set aside, and the appeals were allowed in favor of the appellant, granting consequential relief as per law.