The Chennai Bench of Customs Excise & Service Tax Appellate Tribunal (CESTAT) ruled that CENVAT credit can be claimed for Goods Transport Agency (GTA) services in cases of Free on Road (FOR) destination sales citing the buyer’s premises as the “place of removal.”
Rane Brake Lining Ltd. (RBL), the appellant is a manufacturer of goods falling under Chapters 68 and 87 of the Central Excise Tariff Act, 1985 (CETA) availed CENVAT credit for Goods Transport Agency (GTA) services used for outward transportation of goods from its factory to customers during February 2016 to March 2017.
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The department raised a demand claiming that GTA outward services were not eligible for CENVAT credit, considering the factory gate as the “place of removal.” A show-cause notice was issued proposing to recover CENVAT credit of Rs. 7,28,423 from the appellant.
Initially, the adjudicating authority dropped the demand and agreed with the appellant but the department appealed before the Commissioner (Appeals) where the demand was confirmed.
The appellant challenged the Commissioner (Appeals) order before the CESTAT where the tribunal had directed the lower authority to reconsider the case based on a Supreme Court ruling in Roofit Industries, which dealt with the “place of removal” in similar circumstances.
Despite this, the lower authority ruled against the company again citing a different Supreme Court judgment in Ultratech Cements, which had denied credit for transportation services to the buyer’s premises in FOR (Free on Road) sales.
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The appellant again challenged the Adjudicating Authority order before the Chennai Bench of CESTAT arguing that the adjudicating authority relied on the Ultratech Cement Ltd. judgment rather than complying with Roofit Industries judgment as directed by the tribunal in the earlier remand.
The appellant’s counsel contended that the GTA services used for transporting goods to the buyer’s premises were eligible for CENVAT credit because the ownership and risk of the goods remained with RBL until delivery at the buyer’s location, making the buyer’s premises the “place of removal.”
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On the contrary, the revenue counsel argued that the adjudicating authority was correct to apply the Ultratech Cement judgment despite the Tribunal’s remand, which was issued after the Roofit Industries judgment. Ultratech clarified that CENVAT credit for GTA services is not allowed if the sale is on a FOR (Free on Road) destination basis, where the risk and ownership are transferred to the buyer upon delivery.
A single bench led by Ajit Kumar (Technical Member) observed that the main issue revolved around defining the “place of removal” for CENVAT credit on GTA services.
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After examining several judgments, the tribunal noted that the Board’s Circular dated 08.06.2018 had addressed the issue, clarifying that in cases of FOR destination sales where the ownership and risk remained with the seller until the goods were accepted by the buyer, the seller’s premises should be considered the place of removal.
The tribunal observed that the purchase orders and insurance documents clearly showed that the ownership of the goods remained with the appellant until they were delivered to the buyer in this case. This supported the appellant’s claim that the buyer’s premises should be considered the “place of removal.”
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The tribunal criticized the adjudicating authority’s reliance on the Ultratech Cement ruling without examining the specific factual context. Thus, the tribunal set aside the impugned order and the appellant was granted consequential relief as per the law.
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