2019 (7) TMI 625 - AT - Central Excise

CENVAT Credit - input/input services - outward freight incurred for transportation of finished goods to the customer s premises - period from July, 2015 to November, 2016 - Department was of the view that the place of removal being the factory gate, the appellants are not eligible for the credit - HELD THAT - In the present case, the appellants have incurred the freight charges and has included the freight charges in assessable value on which excise duty has been discharged. This being so, the ownership of the goods remain with the appellant till it reaches the buyer s premises and the conditions for F.O.R. sale as elucidated in the case of M/s. Roofit Industries 2015 (4) TMI 857 - SUPREME COURT stands discharged by the appellant - In the present case, as the freight charges have been included in the assessable value on which excise duty has been discharged, there is no hesitation to conclude that the decision in M/s. Roofit Industries will apply to decide the place of removal. Credit allowed - appeal allowed - decided in favor of appellant.

Summary

Issues:
- Eligibility of credit of service tax paid on outward freight for transportation of finished goods.
- Determination of the place of removal for availing the credit.

Analysis:
1. Eligibility of credit of service tax paid on outward freight:
The appellants, engaged in manufacturing seat foams and seat assembly, availed Cenvat credit of service tax paid on outward freight for transporting finished goods to customer premises. The department contended that as the place of removal is the factory gate, the appellants were not eligible for the credit. Show-cause notice was issued for recovery of wrongly availed credit, interest, and penalties. The original authority and Commissioner (Appeals) upheld the demand. In appeal, the appellant argued that since goods were delivered at the customer's premises under F.O.R. destination agreement, freight charges were included in the assessable value, making the buyer's premises the place of removal. The appellant provided evidence of freight charges included in the assessable value, citing relevant case law and department circular. The Tribunal held that the rejection of credit was unjustified, setting aside the impugned order and allowing the appeal with consequential reliefs.

2. Determination of the place of removal:
The appellant argued that under F.O.R. destination agreement, the buyer's premises constituted the place of removal as freight charges were included in the assessable value. The department, however, contended that three conditions must be satisfied for the buyer's premises to be considered the place of removal: ownership retention by the manufacturer, manufacturer bearing freight charges, and insurance/risk remaining with the manufacturer until delivery at buyer's premises. The Tribunal found that the appellants met these conditions, as evidenced by the inclusion of freight charges in the assessable value. Citing relevant case law and circulars, the Tribunal concluded that the place of removal was the buyer's premises, making the appellants eligible for the credit of service tax paid on outward transportation of goods. The decision aligned with legal precedents and clarified the eligibility criteria for availing such credit, ultimately setting aside the rejection of credit and allowing the appeal.