Credit admissibility on outward transportation of goods.

PJ/CASE LAW/2016-17/3129

Case:- JINDAL STEEL AND POWER LTD VERSUS COMMISSIONER OF CENTRAL EXCISE AND SERVICE TAX, RAIPUR

Citation:-2016-TIOL-1272-CESTAT-DEL

Brief Facts:-Availment of cenvat credit of service tax paid on outward transportation of goods is the subject matter of present dispute. The C.B.E.C. vide circular dated 23.08.2007 has clarified that credit of service tax paid on transportation up to the place of removal would be admissible upon fulfillment of the conditions, namely, the ownership of goods and the property in the goods remained with the seller of the goods till the delivery of goods in acceptable condition to the purchaser at his doorstep; the seller bore the risk or loss or damage to the goods during transit to the destination and the freight charges were an integral part of the price of goods.

Appellant’s Contention:-Shri H.V. Girnikar, ld. Consultant appearing for the appellant submits that as per the terms in the purchase order, the goods were supplied by the appellant on FOR destination basis. The freight element was included in the assessable value, on which Central Excise duty liability has been paid by the appellant. Thus, according to the ld. Consultant, freight charges incurred by the appellant is forming an integral part of the price of goods, buyers premises where the goods are delivered by the appellant should be treated as place of removal and accordingly, the GTA service considered as 'input service' for the purpose of availment of cenvat credit. Appellant claimed the cenvat credit is permissible on freight charges, in the situations of the case, the ld. Advocate has relied on the judgment of Hon'ble Punjab & Haryana High Court in the case of Ambuja Cement Ltd. vs. Union of India, reported in 2009 (236) E.L.T. 431 (P & H)= 2009-TIOL-110-HC-P&H-ST and Circular No.97/08/07-S.T., dated 23.08.2007 issued by the C.B.E.C
Respondent Contention:- The ld. A.R. appearing for the revenue reiterates the findings of the impugned order.

Reasoning of Judgment:- Heard the ld. Counsel for both sides and perused the records.
In the impugned order, the ld. Commissioner (Appeals) has denied the cenvat credit of service tax paid on transportation charges on the ground that no documentary evidences were produced by the appellant to indicate that sale took place at the premises of the buyer and property in goods were transferred at the buyer's premises. He also referred to some of the invoices in the impugned order wherein the appellant had mentioned "all goods to be checked at our works before dispatch and that Company is not responsible for loss of goods during transportation."
Tribunal find from the purchase orders issued by the buyer of the goods in favour of the appellant that the price basis mentioned therein is "FOR at our works,........" Further, the purchase orders also specified that the freight element shall be to the account of the appellant. Furthermore, on perusal of the purchase orders and invoices, Tribunal also find that Central Excise Duty at the applicable rate has been charged on the assessable value of goods and there is no separate mention of freight element therein. With regard to the endorsement made in the invoice that the appellant is not responsible for loss of goods occurred during transit, Tribunal find that the ld. Commissioner (Appeals) has not considered the submissions of the appellant in proper prospective, in as much as, such endorsement was a standard condition pre-printed on the invoices, which have not been deleted due to clerical error. Such pre-printed particulars contained in the invoices, in Tribunal’s opinion, cannot dis-entitled the appellant to avail cenvat credit on GTA service, especially in view of the fact that the purchase orders and the invoices clearly show that the property in goods will pass at the premises of the buyer. Thus, Tribunal was of the view that the ownership/ title of goods, in this case, remained with the appellant, till the same were delivered at the customer's premises and that freight charges mentioned in the invoices/purchase orders, are forming an integral part of the price of goods.
In context with the issue involved in this case, the C.B.E.C. vide circular dated 23.08.2007 has clarified that credit of service tax paid on transportation up to the place of removal would be admissible upon fulfilment of the conditions, namely, (i) the ownership of goods and the property in the goods remained with the seller of the goods till the delivery of goods in acceptable condition to the purchaser at his doorstep; (ii) the seller bore the risk or loss or damage to the goods during transit to the destination and; (iii) the freight charges were an integral part of the price of goods. The said circular was issued by C.B.E.C. by relying on the decision of this Tribunal in the case of Gujarat Ambuja Cement Ltd. vs. C.C.E., Ludhiana,reported in 2007 (6) S.T.R. 249 (Tri.-Del.)= 2007-TIOL-539-CESTAT-DEL and M/s. Ultra Tech Cement Ltd. vs. C.C.E., Bhavnagar, reported in 2007 (6) STR 364 (Tri.)= 2007-TIOL-429-CESTAT-AHM.
The judgment relied on by the Appellant squarely apply to the facts of the present case, wherein the principles enunciated are that outward transportation service utilized by the manufacturer for transportation of finished goods from the place of removal up to the premises of the purchaser is covered within the definition of input service.
In view of the above settled position of law on the issue, Tribunal do not find any merits in the impugned order, and thus, the same is set aside and appeal is allowed in favour of the appellant with consequential relief, if any, as per law.
The appeal is accordingly allowed.

Decision:- Appeal allowed.

Comment:-The gist of the case is that the credit of service tax paid on GTA service would admissible on satisfaction of certain conditions which are as follows:-(i) the ownership of goods and property remain with the seller till the delivery of goods,(ii) the seller bear the risk or loss of goods during the transit to destination place (iii) the freight charged forms an integral part of the value of goods. This view is supported by decision given in the following cases:-
·         Ambuja Cement Ltd. vs. Union of India - 2009-TIOL-110-HC-P&H-ST
·         Gujarat Ambuja Cement Ltd. vs. C.C.E., Ludhiana - 2007-TIOL-539-CESTAT-DEL
·         M/s.Ultra Tech Cement Ltd. vs. C.C.E., Bhavnagar - 2007-TIOL-429-CESTAT-AHM

Prepared by:- Bharat Chouhan

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PJ/CASE LAW/2016-17/3129

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