2015 (12) TMI 1394 - AT - Service Tax

Denial of CENVAT Credit - service tax paid on the freight charges for transportation of goods up to the buyer s premises - transportation service has not been used either directly or indirectly in or in relation to manufacture of assesse s final product - Held that - Facts are not in dispute that the ownership of the goods and the title in the goods remained with the respondent till delivery of the goods in acceptable condition to the purchaser at his door step; that the Respondent bore the risk of loss or damage to the goods during transit to the destination; and that the freight charges were an integral part of the price of the goods. The term place of removal has been defined in section 4(3)(c) of the Central Excise Act, 1944, which also includes any other place of removal where the excisable goods are to be sold after their clearance from the factory . In the present case, since the title or ownership of goods passed on to the buyer at their site, such site of the buyer will be considered as the place of removal and as per the definition of input service, the freight payable for such transportation of goods will be considered as input service for the purpose of taking cenvat credit. - Decided against Revenue.

Summary

Issues:
- Appeal against the Commissioner (Appeals) Central Excise's order allowing cenvat credit for service tax on freight charges.
- Determining whether transportation service used in relation to the manufacture of the final product.
- Interpretation of 'Input Service' under Rule 2L of the Cenvat Credit Rules, 2004.
- Definition of 'place of removal' under section 4(3)(c) of the Central Excise Act, 1944.

Analysis:
The appeal before the Appellate Tribunal CESTAT NEW DELHI involved a challenge by the Revenue against an order allowing cenvat credit for service tax on freight charges for transportation of goods up to the buyer's premises. The Revenue contended that the transportation service had no nexus with the manufacturing of the final product by the assessee. The Tribunal noted that the goods were supplied on a FOR destination basis, with the price including freight and insurance charges recovered from the buyers. It was established that the goods were delivered at the buyer's premises, and the freight charges were borne by the assessee.

The Tribunal delved into the definition of 'Input Service' as per Rule 2L of the Cenvat Credit Rules, 2004, which encompasses the clearance of final products up to the place of removal. In this case, it was undisputed that the ownership of goods remained with the assessee until delivery at the buyer's site, where the title passed on, and the assessee bore the risk of loss during transit. The freight charges were integral to the price of goods. The concept of 'place of removal' under section 4(3)(c) of the Central Excise Act, 1944 was crucial, including sites where goods are sold post-clearance. As the title transferred to the buyer at their site, it was deemed the 'place of removal,' making the freight charges an input service eligible for cenvat credit.

The Tribunal upheld the impugned order, emphasizing that the transportation of goods in a FOR sale scenario constituted an input service under the Cenvat Credit Rules, 2004. The grounds raised by the Revenue were deemed legally unsound, as the nexus between transportation and input service had been explicitly recognized. Consequently, the Tribunal found no defects in the impugned order and dismissed the Revenue's appeal, affirming the cenvat benefit granted to the assessee.