CENVAT credit of service tax on goods transported from place of removal to buyers premises-SLP admitted

CENVAT credit of service tax paid on transport of goods from place of removal to the buyer’s premises – Supreme Court admits SLP

ABCAUS Case Law Citation
ABCAUS 3421 (2020) (11)

Important case law relied upon by the parties:
CCE vs Ispat Industries Ltd 2015 (324) ELT 670 (SC)
CCE vs Emco Ltd 2015 (322) ELT 394(SC)
CCE vs M/s Roofit Industries Ltd 2015 (319) ELT 221(SC)
Ultratech Cement Ltd vs. Commissioner 2015 (37) STR 364(T)

The issue involved was Cenvat Credit of service tax paid on outward transportation of goods by the Excise Authorities.

A show cause notice (SCN) was issued to the assessee for denial of said Cenvat Credit which was confirmed by the   adjudicating authority holding that the credit of Goods   Transport Agency (GTA) was available on input service upto the place of removal after 1st April 2008 in terms of Rule 2(l) of Cenvat Credit Rules, 2004. 

According to the adjudicating authority, in terms of Section   4(3)(c) of the Central Excise Act, 1944, “place of removal” means a factory or any other place or premises of production or manufacture of the excisable goods; a warehouse or any other place or premises wherein the excisable goods have been permitted to be stored without payment of duty.

The Commissioner Central Excise also disallowed Cenvat Credit and levied interest and penalty.

However, the Customs, Excise and Service Tax Appellate Tribunal (Tribunal/CESTAT) allowed the appeal of the assessee.

The Tribunal observed that the assessee was clearing their goods on MRP basis in case of clearance from their depot/ stockists or to their customers and in case of sale to institutional consumers the goods were being cleared by them by adopting the valuation of the goods in terms of Section 4.

Further it was noted that the prices were inclusive of freight and insurance and nothing extra had been charged. The goods were cleared on FOR basis and all liabilities in respect of transportation of goods or damage to goods were on account of assessee. They were liable for safe delivery of goods upto their customers doorstep.  

The Tribunal opined that in such case when the sale of the goods   is completed at the doorstep of the Customer or depot/ stockist, the point of sale shall be such doorstep.

The Tribunal also relied on the Circular No. 1065/4/2018CX dt. 08.06.2018 issued by the CBEC enumerating the General Principle as regards determination of ‘place of removal’.

Relying on the said circular and the judgment of the Hon’ble Supreme Court, the Tribunal held that the ownership of the goods remained with the assessee till the goods reached to the customer’s doorstep and the freight charges as well as damage (insurance) to the goods till destination were borne by the assessee, they were eligible for the credit of service tax paid by them on outward freight.   

Against the order of the Tribunal, the Revenue preferred appeal to the Hon’ble High Court. However the appeal was dismissed by the Hon’ble High Court holding that no question of law was involved.

Aggrieved, the Revenue filed a Special Leave Petition before the Hon’ble Supreme Court  

Relying on the judgments of the Apex Court, the Revenue submitted that the place of the buyer cannot be regarded as the place of removal in view of the amendment to Section 4 of the Central Excise Act 1944.

On the contraray the submission of the assessee was that it had included freight and insurance for the purpose of valuation and paid higher excise duty excise duty.

The Hon’ble Supreme Court admitted the SLP in view of its judgments relied upon by the Revenue.

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