2022 (1) TMI 313 - AT - Central Excise

CENVAT Credit - scope of definition of input service - outward transportation of the goods - place of removal - place of buyer or factory of the appellant or not - supply of goods to buyers on FOR basis - HELD THAT - From the definition of Input Service it becomes clear that all services received by the manufacturer directly or indirectly in relation to the manufacture of final products upto the place of removal are admissible for availment of Cenvat Credit on the Service Tax paid for such services. Accordingly the definition of place of removal acquires importance. The Hon ble Apex Court in the case of ESCORTS JCB LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE DELHI-II 2002 (10) TMI 96 - SUPREME COURT has held that the place of removal has to be determined with reference to the point of sale . Section 19 of Sale of Goods Act says that the property in goods stands transferred only when it is intended to be so transferred . In the present case the goods are being cleared by the appellants to their buyers on FOR basis and all liabilities in respect of transportation of goods or even damage to goods were on account of the appellants/manufacturer. It is the appellants who were liable for safe delivery of goods up to their customer s door steps. Thus present becomes the case were the service of GTA was availed for the goods to be supplied to buyers at their door steps under FOR delivery system was taken. These admitted facts are sufficient to hold that the sale in the present case gets complete only at the door steps of buyers. It becomes clear that when the goods are cleared on FOR basis the freight paid on outward transportation would definitely qualify as input service and thus shall be admissible for Cenvat. In present case the buyer was retaining the right even to reject the goods with the cumulative reading of definition of place of removal under Rule 4 of Central Excise Rules with the definition of inputs as already discussed above the buyer s place in the present case is held to be the place of removal. Accordingly it is held that GTA services availed by the appellant till the buyers place are eligible input service for availment of Cenvat Credit - Appeal allowed - decided in favor of appellant.

Summary

Issues:
Interpretation of the place of removal for availing CENVAT Credit on service tax paid on outward transportation of goods.

Analysis:
The case involved the appellants engaged in manufacturing C I casting and engine parts, availing CENVAT Credit on inputs, capital goods, and input services. The dispute arose when the department questioned the availment of CENVAT Credit on service tax paid on outward transportation of goods by the appellants, considering the factory as the place of removal. The department issued a Show Cause Notice proposing to recover the CENVAT Credit on GTA service tax, leading to an appeal by the department against the rejection of the proposal. The key issue was whether the place of removal should be considered the factory or the buyer's premises for availing CENVAT Credit.

The Tribunal considered the definition of input service and place of removal under the CENVAT Credit Rules and Central Excise Act, respectively. It was noted that the place of removal is crucial for determining the eligibility of CENVAT Credit on service tax paid for transportation services. The Tribunal referred to legal precedents, including the Sale of Goods Act, to determine when the ownership of goods transfers to the buyer, emphasizing that the sale is completed at the buyer's premises in this case.

The Tribunal analyzed the purchase orders and conditions, highlighting that goods were inspected and accepted at the buyer's premises, indicating the transfer of property at the buyer's place. It was concluded that the buyer's premises constituted the place of removal in this scenario, making the outward transportation services eligible for CENVAT Credit. The Tribunal differentiated the present case from previous judgments, emphasizing the specific facts and circumstances that determine the place of removal and the completion of the sale transaction.

Ultimately, the Tribunal set aside the Commissioner (Appeals) order, allowing the appeal in favor of the appellants. The decision was based on the interpretation that the buyer's premises were the place of removal, making the GTA services availed by the appellants eligible for CENVAT Credit. The Tribunal disagreed with the application of previous judgments to the current case, emphasizing the specific details and conditions that determined the place of removal and the completion of the sale transaction.