Buyer’s Premises as ‘Place of Removal’: CESTAT Reaffirms CENVAT Credit Eligibility on GTA Services in Ramco Cements Case [Read Order]

The Customs, Excise and Service Tax Appellate Tribunal of Chennai Bench (CESTAT) reaffirmed that outward freight qualifies for credit when ownership and risk pass at the buyer’s premises, constituting the expression “place of removal” under the Central Excise Act, 1944, and the eligibility of Goods Transport Agency (GAT) services as “input service” under the CENVAT Credit Rules, 2004.

The appeal was filed by Ramco Cements Limited, formerly known as M/s. Madras Cements Limited is engaged in the manufacture of cement classifiable under Chapter 25 of the Central Excise Tariff Act, 1985.

The Appellant cleared cement to its customers under FOR destination sale contract. Freight charges for such arrangements formed part of such sale and transfer of ownership upon the delivery of goods at the buyer’s premises during the period from November 2007 to September 2008. Subsequently, availed CENVAT credit of service tax paid on GTA services used for outward transportation of cement from its factory and depots to customers’ locations.

A show cause notice was issued proposing recovery of CENVAT credit amounting to ₹2.32 crore along with interest and penalty, additionally stating that beyond the factory gate, such outward transportation does not qualify as “input service” under Rule 2(l) of the CENVAT Credit Rules, 2004. The adjudicating authority confirmed the demand by holding that the factory gate was the “place of removal.” The matter was earlier remanded by the Tribunal, but the High Court of Madras later directed the Tribunal to decide the issue afresh, leading to the present decision.

The appellant highlighted a Larger Bench judgment in Ramco Cements Ltd. v. Commissioner of Central Excise, Puducherry (2023), wherein it was held that the “place of removal” must be determined based on the terms of sale. Since the sales were made on FOR destination basis, considering that freight forms an integral part of the assessable value, and the ownership passes only upon delivery at the buyer’s premises. Therefore, the buyer’s premises shall be the “place of removal.”

The Supreme Court order in Vasavadatta Cements Ltd. (2018), along with Andhra Sugars Ltd. (2018), held that the buyer’s premises qualify as an input service under Rule 2(l) of the CENVAT Credit Rules, 2004, which was placed to substantiate the claim. Additionally, with the amendment to Rule 2(l), effective from 1.04.2008, the GTA services are eligible for credit where the place of removal was the buyer’s premises.

The Bench comprising Technical Member, Vasa Seshagiri Rao and Judicial Member, P. Dinesha held that the determination of the “place of removal” is a mixed question of fact and law and cannot be mechanically fixed at the factory gate in all cases, observing that the issue must be examined based on contractual terms, transfer of ownership, assumption of risk, and inclusion of freight in the transaction value.

Aligning with Ramco Cements Ltd. (supra), CESTAT reaffirmed that where sales are effected on FOR destination basis and ownership in goods passes only upon delivery, the buyer’s premises constitute the place of removal under Section 4 of the Central Excise Act, 1944.

Concerning the period prior to 1.04.2008, the bench ruled that outward transportation up to the place of removal qualifies as input service in terms of the law as laid down by the Supreme Court, whereas, after 1.04.2008, where the buyer’s premises may constitute the place of removal, GTA services used up to such point remain eligible for CENVAT credit.

In the light of failure of adjudicating authority in examining the contractual documents and sale terms to determine the correct place of removal, the Tribunal set aside the impugned order and remanded the matter to the adjudicating authority for limited factual verification regarding the nature of contracts, transfer of ownership, and inclusion of freight in the sale price. Further, the authority was directed to re-adjudicate the matter strictly in accordance with settled legal principles.

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