CESTAT Rules CENVAT Credit on GTA Services for Outward Transportation Allowed When Sales Made On “For” Destination Basis in Excise Duty Case [Read Order]
The Tribunal relied on precedents from the Tribunal and the Karnataka High Court for its ruling.
CESTAT - CENVAT Credit - Excise Duty - taxscan.
CESTAT - CENVAT Credit - Excise Duty - taxscan.
The Customs, Excise & Service Tax Appellate Tribunal (CESTAT), Chennai, has held that service tax paid on Goods Transport Agency (GTA) services for outward transportation is eligible for CENVAT credit when sales are made on “for” destination basis, thereby ruling in favour of the assessee in an excise duty dispute.
The appeal was filed by The Ramco Cements Limited, Cement Grinding Unit, Kancheepuram, against an appellate order dated May 10, 2023, by the Commissioner of Goods and Services Tax (GST) & Central Excise (Appeals–II), Chennai.
The dispute arose from a Show Cause Notice issued in May 2010, which alleged ineligible availment of CENVAT credit on GTA services used for outward transportation of cement during June 2009 to December 2009.
The original adjudicating authority confirmed the demand, which was upheld by the Commissioner (Appeals), leading to the appeal before the Tribunal.
Appearing for the Appellant, R. Parthasarathy submitted that cement was sold on “for” destination basis, meaning the transfer of property occurred only upon delivery to the customer. Hence, the buyer’s premises constituted the place of removal under Section 4(3)(c)(iii) of the Central Excise Act, 1944, making outward freight part of the input service.
He placed reliance on the Karnataka High Court ruling in Bharat Fritz Warner Ltd. v. CCE (2022), Madras Cements Ltd. v. Addl. Commissioner, (2015), and the decision by a large bench of the Tribunal in Ramco Cements Ltd. v. CCE, Puducherry (2023), all of which recognized eligibility of GTA service credit in similar circumstances.
Appearing for the Revenue, O.M. Reena contended that under Rule 2(l) of the CENVAT Credit Rules, 2004, input service credit extends only up to the factory gate. Outward transportation beyond the place of removal could not be treated as an eligible input service, and she urged that the appeal be dismissed.
The Bench, consisting of Judicial Member, P. Dinesha and Technical Member, M. Ajit Kumar rejected the Revenue’s contention and noted that several judicial precedents, including Bharat Fritz Warner Ltd. (supra) where it was held that when sales are made on FOR destination basis and ownership passes only at the buyer’s premises, outward freight forms part of the input service and Madras Cements Ltd. (supra) had similarly observed that delivery at the buyer’s place marked the completion of sale, making GTA services credit admissible.
Further, the Tribunal’s own Larger Bench ruling in Ramco Cements Ltd. v. CCE, Puducherry (supra) reinforced this interpretation by holding that the buyer’s premises can be treated as the place of removal. These authorities were relied upon to hold that the appellant was entitled to avail CENVAT credit on outward transportation.
Thus, CESTAT held that when sales are on “for” destination basis, the buyer’s premises constitute the place of removal.
Accordingly, service tax paid on outward GTA services is eligible for credit.
It therefore, set aside the impugned order and allowed the appeal with consequential relief.
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