GTA Services received in Place of Removal Falls under Definition of Input Service under Rule 2(1) of CCR: Himachal Pradesh HC sets aside CESTAT Order [Read Order]

The Himachal Pradesh High Court has set aside the Customs Excise and Service Tax Appellate Tribunal ( CESTAT ) order, stating that Goods Transport Agency ( GTA ) services received in the place of removal fall under the definition of input service as per Rule 2(1) of the Cenvat Credit Rule ( CCR ), 2004.

 The appellant is that as per purchase orders placed by its customers with it, the transportation of the liquid gases from the factory premises of the appellant to the customer’s premises is the appellant’s responsibility; the purchase order reflects only one agreed value for the entire transaction as the consideration payable by the customer is inclusive of transportation charges; the excise duty and VAT at appropriate rates is to be paid on the basic rate, transportation charges and facility charges; the appellant is responsible for any loss in transit as it is the responsibility of the appellant to deliver the goods; and the ownership is transferred only when the goods are delivered and accepted by customers.

The appellant’s stand is that it is availing and utilizing the CENVAT Credit of duty paid on Inputs and Capital Goods as well as credit of Service tax paid on Input Services, including GTA Services in terms of Rule 3(1) read with Rule 3(4) of the CENVAT Credit Rules, 2004

The gist of the allegation in the show cause notices was that the appellant had wrongly availed CENVAT Credit along with interest though it was not eligible to avail the same on the outward transportation of the liquid gases from the factory gate, which is the place of removal of excisable goods to the buyers’ premises; and that credit of Service tax paid on outward transportation of goods is only admissible up to the place of removal as defined under Rule 2(1) of the CENVAT Credit Rules, 2004.

The appellant denied the said allegations in its replies to the show cause notices and contended that the place of removal is not the factory gate and it is the buyers’ premises only as the

sale of gases terminates at the buyers’ premises. It contended that due to the peculiar nature of facts of the instant case, the place of removal cannot be the factory gate as the responsibility

to transfer the gases to the buyers’ premises is that of the appellant, and the said responsibility cannot be shifted to the buyers. It also relied on certain circulars issued by the Central Board of Excise and Customs ( CBEC ) issued from time to time. It also contended that no penalty should be imposed and no interest can also be levied upon it.

The division bench comprising Justice M.S Ramachandra Rao and Justice Jyotsna Rewal Dua hold on issues mentioned above that the CESTAT was not justified in holding that place of removal for the GTA Services provided under FOR sale contract is the manufacturer’s premises and not the place where the goods are sold, that the Tribunal was not justified in holding that the GTA services in the present case are being received beyond the place of removal and therefore not covered within the definition of Input Service under Rule 2(1) of CENVAT Credit Rules, 2004. Accordingly, appeal was allowed and the impugned orders were set aside.

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