2015 (12) TMI 1397 - AT - Service Tax

Denial of CENVAT Credit - Service tax paid on outward transportation - Held that - As per the provisions of section 4 (3) (c) of the Central Excise Act, 1944, the place or removal in this case shall be the buyers factory, where the goods are ultimately delivered by the appellant. Reading of the inclusive part of definition of input service makes the position clear that if the place of removal is premises of consumer, then the assessee shall be entitled to cenvat credit of service tax paid on the freight element for movement of goods from the factory to such destination point - if under the terms of the contract, the sale takes place at the destination, then that place will be considered as the place of removal and service tax paid on GTA service for transporting the goods, up to the destination, will be available for Cenvat credit - since the freight amount inclusive of service tax has been charged in the bill and the billed amount was paid by the buyer to the appellant, in my considered opinion, the service tax component on which the appellant took Cenvat credit is forming an integral part of the price of goods. - No merit in impugned order - Decided in favour of assessee.

Summary

Issues: Appeal against denial of cenvat credit on service tax paid on outward transportation.

Analysis:
1. Issue of Denial of Cenvat Credit: The appellant, a manufacturer of hazardous chemicals, availed cenvat credit of service tax paid on outward freight during the disputed period. However, the adjudication order denied the credit, stating that the freight charges incurred beyond the factory gate are not eligible for cenvat credit under the Cenvat statute. The Commissioner (Appeals) upheld this decision, leading to the present appeal before the Tribunal.

2. Appellant's Argument: The appellant's advocate argued that the goods were dispatched directly from the factory to the buyer's premises without transhipment, and ownership remained with the appellant until delivery at the buyer's site. Referring to a Chattisgarh High Court judgment and a CBEC Circular, the advocate contended that the delivery point should be considered the place of removal, making the service tax on freight charges eligible for cenvat credit.

3. Revenue's Argument: The Revenue, represented by the DR, relied on a different Chattisgarh High Court judgment to assert that the freight charges were not an integral part of the goods' price, thus disqualifying the service tax paid on such services for cenvat credit.

4. Tribunal's Decision: After considering both parties' arguments and examining the purchase contract between the appellant and the buyer, the Tribunal found that the ownership of goods remained with the appellant until delivery at the buyer's premises. Citing the Chattisgarh High Court judgment in favor of the appellant's position, the Tribunal concluded that the place of removal in this case was the buyer's factory, making the service tax on freight charges eligible for cenvat credit. Additionally, the Tribunal referenced a CBEC Circular and Supreme Court judgment to support its decision. Consequently, the Tribunal set aside the impugned order, allowing the appeal in favor of the appellant.

This detailed analysis of the judgment highlights the key legal arguments, interpretations, and precedents considered by the Tribunal in resolving the issue of denial of cenvat credit on service tax paid on outward transportation.