2016 (9) TMI 45 - AT - Service Tax

Whether service tax credit with respect to outward transportation from the factory of the appellant to the buyer s premises is admissible to the appellant or not - Central Excise duty is paid on MRP basis - all elements of cost are included in the MRP and the delivery becomes an FOR destination basis transaction - fulfillment of all conditions prescribed under CBEC circular No. 97/8/2007-ST dt 23/8/2007 - Held that - in the present proceedings transit insurance & outward freight is also borne by the appellant. Ownership of the goods till their delivery at the footsteps of the buyer remains with the appellant and service tax on freight is also paid by the appellant. Under the existing factual matrix deliveries of cement in the present proceedings have to be considered as on FOR destination basis and conditions of CBEC Circular No. 97/6/2007- ST dt 23/8/2007 are fulfilled as per the ratio laid down by P & H High Court in the case of Ambuja Cement Ltd. Vs. UOI 2009 (2) TMI 50 - PUNJAB & HARYANA HIGH COURT . Therefore, as per settled proposition of law credit of service tax paid on the outward freight during the relevant period was correctly taken by the appellant. - Decided in favour of appellant

Summary

Issues Involved:
1. Admissibility of service tax credit on outward transportation.
2. Interpretation of the term "place of removal" under Central Excise Act.
3. Applicability of CBEC Circular No. 97/8/2007-ST dated 23/8/2007.
4. Relevance of previous case laws and judgments.

Detailed Analysis:

1. Admissibility of Service Tax Credit on Outward Transportation:
The primary issue in this appeal is whether the appellant, a cement manufacturer, can claim service tax credit on outward transportation to the buyer's premises. The appellant argued that since the goods are delivered to the customer's doorstep and all costs, including transit insurance, are included in the MRP, it should be considered as FOR (Free on Road) destination sales. The appellant relied on several case laws, including Birla Corporation Ltd Vs CCE & ST and Ambuja Cement Ltd Vs UOI, to support their claim that such credit is admissible.

2. Interpretation of the Term "Place of Removal":
The appellant contended that the place of removal should be considered the buyer's premises in this case, as the ownership of goods remains with the appellant until delivery. The CBEC Circular No. 97/8/2007-ST supports this view by stating that if the sale occurs at the destination point and the seller bears the risk of loss or damage during transit, the place of removal can be the buyer's premises. The appellant fulfilled all conditions prescribed under this circular, making the place of removal the buyer's doorstep.

3. Applicability of CBEC Circular No. 97/8/2007-ST Dated 23/8/2007:
The circular clarifies that the place of removal is determined by the facts of each case and can include the buyer's premises if the seller bears the transit risk and costs. The appellant argued that their sales pattern meets these criteria, as the delivery is on an FOR destination basis, and they bear all transit costs and risks. The P & H High Court's decision in Ambuja Cement Ltd Vs UOI supported this interpretation, stating that the service of transportation up to the customer's doorstep qualifies as input service under Rule 2(l) of the Cenvat Credit Rules.

4. Relevance of Previous Case Laws and Judgments:
The appellant cited several case laws to support their claim, including the P & H High Court's decision in Ambuja Cement Ltd Vs UOI, which held that transportation up to the customer's doorstep is an input service. The Revenue, however, relied on the Apex Court's decision in CCE & Cus Nagpur Vs. Ispat Industries Ltd, which stated that the buyer's premises cannot be the place of removal. However, this case was distinguished as it dealt with the period before the amendment to Section 4 of the Central Excise Act in 2003 and was focused on valuation, not Cenvat credit.

Conclusion:
The Tribunal concluded that the appellant's claim for service tax credit on outward transportation is valid. The appellant fulfilled all conditions prescribed under the CBEC circular, and the delivery was on an FOR destination basis. The Tribunal set aside the order of the first appellate authority, allowing the appeal and confirming that the credit of service tax paid on outward freight was correctly taken by the appellant.