Cenvat credit on service tax paid, Service Tax

[ANCHAL RASTOGI]

our co ia a manf. co and sell its material on f.o.r. basis. can we take cenvat credit of s.t. paid on outward frieght and use for payment of e.d.. is there any case law of sc or hc according to which s.t. paid on outward frieght is not eligible for credit because it is not input sevice, even goods sold on f.o.r. basis. if, yes, pl let me know.

Posts / Replies

[Madhukar N Hiregange]

Gujrat ambuja cements case recenlty has dialloed outward freight. I am of the opinion that ths case is not proper and has not been properly ordered. When the services are provided outside the factory gate for which the assessee is made taxable no reason for restricing the credit. Deifnition is also not rstricitng the same though in the inclusive portion it mnetions out ward freight upot the place of removal. Assessee maybe approased and asked to agitate if substantial stakes involved and wait for some favourable decision in next year or so.

[Ramanujam V]

It is widely viewed that in Gujarat Ambuja case, the issue is not properly put forth. As per the provisions and also accepted by the Board that the CENVAT credit can be taken on outward freight, depending on the nature of 'sale' transaction. If it is a factory gate/depot sale, then no credit can be claimed, but in case the contract is for the destination sale, then the service tax paid on outward freight component can be taken for CENVAT credit.

[Madhukar N Hiregange]

Recently there is a case of Gujrat Simlee where the tribunal has stayed the recovery in similar matter. This gives strength to our view.

[A.K.Sharma]

As per clarification given in the Master Circular of CBEC for Service Tax bearing No. 97/2007 dated 23/8/2007, for a manufacturer /consignor, the eligibility to avail credit of the service tax paid on the transportation during removal of excisable goods would depend upon the place of removal as per the definition under section 4 (3)(c) of the Central Excise Act, 1944. As per this clarification there may be situations where the manufacturer /consignor may claim that the sale has taken place at the destination point because in terms of the sale contract /agreement (i) the ownership of goods and the property in the goods remained with the seller of the goods till the delivery of the goods in acceptable condition to the purchaser at his door step; (ii) the seller bore the risk of loss of or damage to the goods during transit to the destination; and (iii) the freight charges were an integral part of the price of goods. In such cases, the credit of the service tax paid on the transportation up to such place of sale would be admissible if it can be established by the claimant of such credit that the sale and the transfer of property in goods (in terms of the definition as under section 2 (h) of the Central Excise Act, 1944 as also in terms of the provisions under the Sale of Goods Act, 1930) occurred at the said place.