2018 (4) TMI 215 - AT - Central Excise

CENVAT credit - input service - outward freight - place of removal - Department alleged that since duty was discharged at factory gate point, the fact gate becomes the place of removal and the outward freight which is used for clearance of final products beyond the factory gate did not fall within the purview of definition of input service - Held that - in the case of Ambuja Cements Ltd. Vs. UOI 2009 (2) TMI 50 - PUNJAB & HARYANA HIGH COURT , the Hon ble High Court of Punjab & Haryana has held that when the goods are sent on FOR basis up to the buyer s premises and all the conditions in Circular No,97/8/2007 dt 23/08/2007 are satisfied, then the assessee is entitled to take CENVAT credit of service tax paid on GTA service - credit allowed - appeal allowed - decided in favor of appellant.

Summary

Issues:
- Appeal against rejection of input service credit on outward freight
- Interpretation of input service under CENVAT Credit Rules, 2004
- Ownership and property transfer in goods
- Application of judicial precedents in similar cases

Analysis:
The appeal was filed against the rejection of input service credit on outward freight by the Commissioner(Appeals). The appellants, engaged in manufacturing HDPE and PP bags, were alleged to have wrongly availed the credit as the outward freight beyond the factory gate was not considered an input service. Three show-cause notices were issued covering different periods, confirming demand, interest, and penalties. The appellants argued that the price was based on FOR basis, and transportation cost was part of the goods' price, with ownership transferring to the buyer upon goods reaching them. The Commissioner(Appeals) rejected the appeal, leading to the present appeal.

The appellant contended that the impugned order was contrary to facts, law, and binding judicial precedents. They highlighted paying service tax on transportation to depot or customer premises and cited relevant rules defining input service under CENVAT Credit Rules, 2004. The appellant argued that the destination point would be the place of removal if specific conditions were met, including ownership transfer and freight charges being part of the price. They supported their argument with purchase orders and referred to relevant judicial decisions.

After hearing both sides and examining the records, the Tribunal found that the cost of transportation was included in the price, with ownership transferring upon goods reaching the buyer's premises and all risks borne by the seller. The Tribunal referenced a specific case where CENVAT credit was allowed on GTA service under similar conditions. Relying on this precedent, the Tribunal concluded that the impugned order was unsustainable in law and set it aside, allowing the appeal of the appellant. The judgment was pronounced on 07-02-2018.