2024 (10) TMI 623 - HC - Central Excise

Entitlement to avail input tax credit of the tax paid - input services - services availed from goods transport agencies for transporting the products manufactured by it to the premises of the buyer concerned under a contract that was entered on Freight on Road (FOR) basis - HELD THAT - While it may be a fact that in the decision of the Supreme Court in COMMISSIONER, CUSTOMS AND CENTRAL EXCISE, AURANGABAD VERSUS M/S ROOFIT INDUSTRIES LTD. 2015 (4) TMI 857 - SUPREME COURT that is relied upon by the learned counsel for the appellant, it was found that in circumstances where a manufacturer enters into a contract with his buyer on FOR basis, the place of removal for the purposes of payment of Central Excise duty has to be seen as the buyer's premises and not the manufacturer's factory, the upshot of the said finding was that the manufacturer, in that case, was legally obligated to include the cost of transportation of the goods from his factory to the premises of the buyer in the assessable value of the goods for the purposes of payment of Central Excise duty. In the instant cases, however, it is found that it is the admitted case that the appellant did not include the transportation costs in the assessable value of the goods for the purposes of payment of Central Excise duty. It is failed to see how the appellant can claim input tax credit in respect of the transportation services availed by it for the purposes of transporting the goods from the place of removal to the buyer's premises - there are no reason to interfere with the order of the Tribunal impugned in these appeals - appeal dismissed.

Summary

Issues:
- Whether the appellant is entitled to avail input tax credit of the tax paid in relation to services availed from goods transport agencies for transporting products to the buyer's premises under a contract entered on Freight on Road [FOR] basis.

Analysis:
The judgment by the High Court of Kerala involved considering the entitlement of the appellant to claim input tax credit for tax paid on transportation services from goods transport agencies. The appellant, engaged in the manufacture and sale of electrical transformers, had contracts with customers for supply, installation, and commissioning of transformers on FOR basis, where the obligation of transportation was on the appellant. The appellant argued that since the sale was concluded at the buyer's premises, they should be allowed to treat the services from transport agencies as input services for claiming CENVAT credit. However, the authorities relied on a Supreme Court decision to reject the claim, stating that CENVAT credit on GTA services is only available up to the place of removal, which was deemed to be the appellant's factory, not the buyer's premises.

The appellant contended that a Supreme Court decision supported their claim, where the place of removal for Central Excise duty was considered the buyer's premises in a similar FOR basis contract scenario. However, the court noted that in the instant cases, the transportation costs were not included in the assessable value of goods for Central Excise duty payment. As a result, the court found it untenable for the appellant to claim input tax credit for transportation services when the costs were not factored into the duty payment. The court emphasized that allowing such a claim would go against the purpose of the CENVAT credit scheme, which aims to prevent tax cascading and consumer burden. Consequently, the court dismissed the appeals, upholding the Tribunal's decision to reject the appellant's claim for input tax credit on transportation services.