2016 (6) TMI 818 - AT - Central Excise

Cenvat Credit - service tax paid on GTA services - place of removal of finished goods - Held that - On perusal of para11 and para 15 of the agreement as noticed above it is very much clear that sale is on FOR(Free on Road) basis. It is clearly stated that price is inclusive of freight charges. The invoice also clearly declares that goods are sold for delivery on FOR basis and that ownership responsibility continues till goods are handed over to the customer. Para 12 is nothing but a clause explaining the time and mode of payment to be made. The contention of Revenue that para 12 would show that ownership of goods get transferred to customer immediately on making payment is without basis. Again the last part of para 11 is only an option given to customer for transporting the goods in their vehicles. But not even a single instance of exercising this option is proved by Revenue. Thus as per records the appellants have succeeded in establishing that the sale is on FOR basis and place of removal is the customer s premises. On such score the Board Circular is binding on the department and the denial of credit is unjustified. - Credit allowed - Decided in favor of assessee.

Summary

Issues involved:
Denial of Cenvat credit on outward transportation; Interpretation of terms and conditions in the distribution agreement; Eligibility for credit of service tax paid on outward transportation.

Analysis:
1. Denial of Cenvat credit on outward transportation:
The appellant contested the denial of Cenvat credit on outward transportation, arguing that the place of removal is the customer's premises based on the terms of the distribution agreement. The original authority confirmed a substantial demand of Cenvat credit irregularly availed on outward freight of finished goods, along with interest and penalties. The Commissioner (Appeals) upheld the demand and interest but modified the penalty. The appellant challenged the demand, interest, and penalty before the Tribunal.

2. Interpretation of terms and conditions in the distribution agreement:
The appellant's consultant highlighted specific clauses in the agreement, such as para 11 and para 15, to establish that the sale is on a Free on Road (FOR) basis. The argument revolved around whether ownership of goods passes at the factory gate or the customer's premises based on para 12 of the agreement. The appellant relied on various judgments to support their interpretation of the agreement terms.

3. Eligibility for credit of service tax paid on outward transportation:
The main issue revolved around determining whether the appellant is eligible for credit of service tax paid on outward transportation of finished goods. The Tribunal analyzed the relevant clauses of the agreement, particularly para 11 and para 15, to conclude that the sale is indeed on an FOR basis. The Tribunal also referred to a Board circular clarifying the conditions for treating a transaction on an FOR basis. Ultimately, the Tribunal found in favor of the appellant, stating that they are eligible for credit of service tax paid on outward transportation.

In conclusion, the Tribunal allowed the appeals, granting consequential reliefs to the appellant. The judgment emphasized the importance of interpreting contractual terms accurately to determine the place of removal and eligibility for tax credits.