2022 (10) TMI 733 - AT - Service Tax

CENVAT Credit - service tax paid for availing the Goods Transport Agency Service - despatching finished goods (outward transportation) on FOR destination basis to the buyers - transportation charges have been incurred from the factory gate to the premises of the customers - Place of removal - HELD THAT - In the facts and circumstances of this case, the place of removal is the premises of the buyer, not the factory gate of the seller/appellant, as the finished goods are cleared by the appellant on FOR destination basis - the appellant is entitled to Cenvat credit on the GTA service for outward transportation of the goods cleared on FOR destination basis. Appeal allowed - decided in favor of appellant.

Summary

Issues involved: Entitlement to Cenvat credit of service tax paid for outward transportation of goods on FOR destination basis.

Analysis:
1. Issue of Cenvat credit entitlement: The appellant, a manufacturer of dutiable goods, availed Cenvat credit of service tax paid on outward transportation of goods from their premises to customers on FOR destination basis. The Adjudicating Authority disallowed the credit, leading to an appeal. The Commissioner (Appeals) upheld the disallowance, citing the definition of "place of removal" and a circular stating that service tax paid on transportation up to the place of removal is not admissible. However, the appellant argued that as they paid excise duty on the sale price inclusive of transportation cost, they are entitled to the credit. The Tribunal considered the definition of "place of removal" and held that in FOR destination transactions, the premises of the buyer constitute the place of removal, allowing the Cenvat credit for outward transportation services.

2. Interpretation of "place of removal": The Tribunal analyzed the concept of "place of removal" under the Central Excise Act and Cenvat Credit Rules. It noted that the goods were directly sold from the factory gate to customers without being first cleared to a depot or other premises. The Tribunal distinguished the concept of "place of removal" for determining assessable value from its application in Cenvat Credit Rules. It emphasized that in FOR destination transactions, the buyer's premises should be considered the place of removal, contrary to the Revenue's contention that the factory gate serves as the place of removal.

3. Precedent and legal arguments: The appellant relied on a Tribunal decision involving similar facts to support their claim for Cenvat credit. The Tribunal considered this precedent and the appellant's argument that excise duty paid on the sale price inclusive of transportation cost entitles them to the credit. The Revenue, however, supported the impugned order and referred to the circular emphasizing the inadmissibility of service tax paid on transportation up to the place of removal. Despite these arguments, the Tribunal found in favor of the appellant, allowing the appeal and granting consequential benefits in accordance with the law.

In conclusion, the Tribunal ruled in favor of the appellant, holding that they are entitled to Cenvat credit on the Goods Transport Agency service for outward transportation of goods cleared on FOR destination basis. The decision emphasized the interpretation of "place of removal" in FOR destination transactions and granted the appellant the benefit of the credit, setting aside the impugned order disallowing the credit.