2017 (9) TMI 210 - AT - Central Excise

CENVAT credit - input service - transportation service - place of removal - whether the service of transportation upto the customer s doorstep i.e. FOR destination sales where the entire cost of freight is paid and borne by the manufacturer would be input service within the meaning of Rule 2(1) of the CC Rules 2004? - Held that - the identical issue has come up before the Tribunal in the case of RCL Cement Limited Vs. CCE Shillong 2016 (9) TMI 45 - CESTAT KOLKATA where it was held that credit of service tax paid on the outward freight during the relevant period was correctly taken by the appellant - the claim of cenvat credit on outward freight of the appellants is allowed - appeal dismissed - decided against Revenue.

Summary

Issues:
- Whether service of transportation up to the customer's doorstep in "FOR destination" sales, where the entire cost of freight is borne by the manufacturer, qualifies as "input service" under Rule 2(1) of the CC Rules, 2004.

Analysis:

Issue 1: Eligibility of transportation service as "input service" under CC Rules, 2004
- The appeals involved a common issue of determining whether the transportation service provided up to the customer's doorstep in "FOR destination" sales, with the freight cost borne by the manufacturer, qualifies as an "input service" as per Rule 2(1) of the CC Rules, 2004.
- The Hon'ble High Court of Punjab & Haryana, in a similar case, held that the manufacturer/consignor could avail credit of service tax paid on transportation based on the place of removal, as defined in the circular issued by the Central Board of Excise and Customs (CBEC).
- The circular specified conditions where the sale was deemed to occur at the destination point, allowing credit of service tax paid on transportation up to that point if certain criteria were met, such as ownership of goods, risk of loss during transit, and freight charges being integral to the price of goods.
- The circulars issued by the Board were deemed binding, and the revenue was precluded from challenging their correctness, as established by various Supreme Court judgments cited in the case.
- The Tribunal concluded that the appellant fulfilled the circular requirements, as the ownership and property of goods remained with the seller until delivery at the customer's doorstep, and freight charges were integral to the "FOR destination" price, making the transportation service an "input service" eligible for credit.
- Consequently, the Tribunal allowed the claim of cenvat credit on outward freight for the appellants, dismissing the Revenue appeal and allowing all appeals filed by the appellants.

This detailed analysis reflects the Tribunal's interpretation of the legal provisions, reliance on precedents, and application of circulars to determine the eligibility of transportation services as "input services" in the context of "FOR destination" sales.