CESTAT Rules Customer’s Premises is the ‘Place of Removal’ in FOR Destination Sales Where Seller Bears Transit Risk [Read Order]

The Mumbai Bench of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) ruled that the customer’s premises can qualify as the “place of removal” in Free on Road (FOR) destination sales, thereby entitling the assessee to avail CENVAT credit of service tax paid on outward Goods Transport Agency (GTA) services.

U.B. Stainless Ltd., the appellant, is engaged in the manufacture of stainless steel welded tubes and pipes. The dispute arose when the department disallowed CENVAT credit of Rs. 6,02,379 availed on service tax paid for GTA services used in the outward transportation of goods from the factory to the customer’s premises for the period April 2017 to June 2017.

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The department alleged that such transportation extended beyond the “place of removal” as defined under Rule 2(l) of the CENVAT Credit Rules, 2004, following the 1 April 2008 amendment, which restricted credit eligibility to services availed “upto” the place of removal.

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A show cause notice was issued in May 2019, culminating in an adjudication order confirming recovery of the credit along with interest and penalties. This was upheld by the Commissioner (Appeals), following which the appellant approached the CESTAT.

The appellant’s counsel argued that under the terms of their sales contracts, goods were sold on FOR destination basis and the company bore the risk and cost of transportation up to the customer’s doorstep. They submitted purchase orders, tax invoices, and customer declarations affirming that no separate freight was charged and ownership transferred only upon delivery. They relied on CBEC circulars dated 23 August 2007 and 20 October 2014, and judgments including Bharat Fritz Werner Ltd. v. CCT, Bangalore, to assert that in such circumstances, the customer’s premises constitute the “place of removal.”

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The revenue relied heavily on the Supreme Court’s decision in Commissioner v. Ultratech Cement Ltd. and the CBEC circular dated 8 June 2018, arguing that the definition of “input service” under Rule 2(l) as amended from 1 April 2008 permitted credit only up to the place of removal, which did not include the customer’s premises. They argued that the appellant failed to meet the conditions required to treat the customer’s site as the place of removal.

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The single-member bench led by Judicial Member Ajay Sharma reviewed the contractual documents, including purchase orders that referred to “freight paid by supplier” or “freight inclusive,” and invoices where no separate freight component was charged.

The tribunal observed that the ownership and risk of the goods remained with the appellant during transit, and the transfer occurred only upon delivery at the customer’s premises. Relying on precedents such as Emco Ltd. and Roofit Industries Ltd., and the interpretation adopted by the Karnataka High Court in Bharat Fritz Werner, the tribunal held that in FOR destination sales, the customer’s premises can be treated as the place of removal.

The tribunal held that the appellant was entitled to take credit of service tax paid on GTA services used for outward transportation. The impugned order was set aside, and the appeal was allowed with consequential relief as per law.

To Read the full text of the Order CLICK HERE

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