If Place of Removal is Factory Premises of Assessee, Outward Transportation ‘from the said place’ would amount to Input Service: Supreme Court [Read Judgment]

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The Supreme Court has said that once it is accepted that place of removal is the factory premises of the assessee, outward transportation ‘from the said place’ would clearly amount to input service.

The Assessee in instant appeal was a sugar, molasses manufacturing company called M/s. Andhra Sugars Ltd. where revenue needs determination is as to whether the expression ‘input service’ as defined in Rule 2(l) of the Cenvat Credit Rules, 2004 and outward transportation provided beyond the place of removal is not eligible for input service for availing Cenvat Credit.

Revenue issued show cause notice to the respondent-company demanding cenvat credit of three lakhs as it had taken credit of input services namely service tax paid on transportation charges up to the place of customers which according to the Revenue is inadmissible.

Revenue raised demand and imposed the penalty under Rule 15 of the Rules, 2004. Being aggrieved, the Respondent filed an appeal before the Commissioner (Appeals), Guntur wherein the Company got relief from the said demand. Though the Revenue approached CESTAT, the Tribunal dismissed the appeal filed by the Revenue holding that the same is covered by the decision of the High Court of Karnataka in the case of Commissioner of Central Excise and Service Tax, Bangalore v. ABB Ltd.

After having both the parties contentions, Justice A.K Sikri relied on the CBEC Circular No. 97/8/2007-ST as per which the definition of ‘input service’ was clarified and the Circular also provided the conditions which are to be satisfied to cover the case within ‘place of removal’.

The Court pointed out that the three conditions should be satisfied to cover the case within ‘place of removal’ in the circular regarding ownership of the goods till the delivery of the goods at the purchaser’s doorstep is one among them and also endorsed the decision of CESTAT in Gujarat Ambuja Cement Ltd. and M/s. Ultratech Cement Ltd.

The Apex Court further observed that “Once it is accepted that place of removal is the factory premises of the assessee, outward transportation ‘from the said place’ would clearly amount to input service. That place can be the warehouse of the manufacturer or it can be customer’s place if from the place of removal the goods are directly dispatched to the place of the customer. One such outbound transportation from the place of removal gets covered by the definition of input service”.

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