Buyer's Premises Constitute 'Place of Removal', Not Factory Gate: CESTAT Allows Cenvat Credit on Service Tax [Read Order]

The Customs, Excise and Service Tax AppellateTribunal (CESTAT), Mumbai Bench, allowed Cenvat credit on transportation services of finished goods to customer’s premises as it constitutes a ‘place of removal’.

The brief facts of the case are that the assessee-appellant is a manufacturer of various excisable goods such as parts and accessories of motor vehicles and engines. The department received information that appellant had availed Cenvat Credit of service tax paid on outward transportation of finished goods up to the customers’ premises under the category of Goods Transport Agency (GTA) services under Reverse Charge Mechanism.

According to the department, GTA under reverse charge mechanism was beyond the ‘place of removal’ as defined under the Cenvat Credit Rules, 2004. Therefore, it did not qualify as ‘input service’ under Rule2(1) of the Cenvat Credit Rules, 2004 (the Rules).

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Appeals filed by the Appellant before the Commissioner (Appeals) were rejected and hence they appealed before the Tribunal. It is to be noted that on the first round of litigation, the CESTAT remanded the matter back for fresh adjudication on 27.10.2017.

In the second round, the counsel for the appellants submitted that the Purchase Order (PO) issued by the customers reflect that the goods were sold on ‘Freight on Road basis’, under which the appellant bore the freight and transportation charges. The transporters raised invoices against this to the appellant and the appellant paid the freight charges. Then, these freight charges were included in the sale price charged to the customers and not shown separately in the sales invoices.

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It was argued that since the sale could only be completed upon the delivery of the goods at the buyer’s premises and the risk of loss or damage remained with the seller till said delivery. The counsel additionally submitted that the freight charges form part of the assessable value and excise duty was paid on value inclusive of transportation charges. Thus, argued that GTA service qualifies as ‘input service’ under Rule 2(1) of the Rules.

The authorized representative from the department claimed that as per the definition of ‘place of removal’ and the CBEC Circulars, Cenvat credit of service tax paid beyond the factory gate is not admissible.

The tribunal took note of CCE & ST v. Ultra Tech Cement LTd., (2008) which held that where ownership and risk remain with the seller till delivery at buyer’s premises, the premises constitute as the ‘place of removal’ and credit of GTA services up to such place is admissible. CESTAT affirmed this decision in UB Stainless Ltd. v. Commr. CGST & GST (2025).

The present appeals since were not disputed on the consideration of the consignment being on Freight on Road destination basis, and thus the sale included freight. The single member bench of Ajay Sharma held that GTA service availed for outward transportation of finished goods up to the customer’s premises qualify as ‘input service’ under Rule 2(1) and the credit availed by appellant was held admissible. The tribunal allowed consequential relief, if any.

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