Whether credit could be allowed on the outward transportation of the goods sold on FOR destination basis?

PJ/Case Law /2016-17/3375

Case-C.C.E., CUS. & S.T., MEERUT-II Versus TRIVENI ENGINEERING & INDUSTRIES LTD.
Citation-2016 (45) S.T.R. 225 (Tri. - All.)
Brief Facts-Revenue is in appeal against the Order-in-Appeal No. MRT/EXCUS/002/APP/20/2014-15, dated 13-5-2014, whereby the ld. Commissioner (Appeals), has allowed input service credit on output transportation services. The period involved in this case is from October, 2007 to June, 2012.
Brief facts of the case are that the respondent is a manufacturer of sugar and molasses and selling the goods on FOR destination basis. The ownership of the goods up to the delivery to their customer is with them and goods were insured by them. Insurance charges are also paid by the respondent. Outward transportation charges have formed part of the assessable value of the goods. In these circumstances, the ld. Commissioner (Appeals) held that the respondent has complied with the condition of Circular No. 97/8/2007, dated 23-8-2007. Therefore, respondent is entitled to take Cenvat credit. Against that order, Revenue is in this appeal.

Appellant’s Contention-The ld. AR for the Revenue, submits that after 1-4-2008, the respondent is not entitled to take Cenvat credit on outward transportation services as these are finished goods which have been transported and Cenvat credit is available to the services which have nexus with the manufacturing activity of the final product. Admittedly, these services have been availed after manufacturing of final product. Therefore, same has no nexus with the manufacturing activity. It is further submitted that the place of removal is the factory of the respondent. Therefore, in this case, transportation has been availed beyond their factory. Therefore, they are not entitled to take Cenvat credit. It is further submitted that the transportation services is an input service of the customer and not of the respondent. Therefore, respondent is not entitled to take Cenvat credit. He also relied on the decision in the case of CCE, Kolkata v. Vesuvious India Ltd. : 2014 (1) ECS (47) (HC-Kol.) to say that respondent is not entitled to take Cenvat credit wherein the C.B.E. & C. Circular and the decision in the case of ABB Ltd. v. CCE, Bangalore : 2011 (23) S.T.R. 97 (Kar.) passed by the High Court of Karnataka has been considered. He further submitted that words “services up to the place of removal” has been used twice after 1-4-2011. The ld. AR also states that the Revenue is in appeal before the Hon’ble Supreme Court of India against the judgment of the Hon’ble Karnataka High Court in the case of ABB Ltd. (supra).

Respondent’s Contention-The ld. Counsel for the respondent relies on the impugned order and submits that the place of removal in this case is the FOR destination of the customer. Therefore, they are entitled to take Cenvat credit.

Reasoning Of Judgement-Having considered the rival contentions, the Tribunal found that the short issue involved herein, required to be determined that whether the respondents are entitled to take Cenvat credit on outward transportation services when the goods are sold on FOR destination or not. Now the question arises if goods are sold on FOR basis what is the place of removal? Admittedly, when goods are sold on FOR basis, the place of removal is the destination of the goods. Therefore, up to that place, whatever services availed by the assessee is entitled to take Cenvat credit. Admittedly, in this case, goods have been sold on FOR destination basis and transportation charges have been paid by the respondent themselves. Goods were insured and ownership of the goods remained with the respondent till delivery of the goods were made to the customer. In these circumstances, the Tribunal found that decision in this case of Vesuvious India Ltd. (supra) relied on by the appellant is not applicable to the facts of this case to say that services have been availed up to the place of removal of the goods. Assessee is entitled to take Cenvat credit.
Therefore, the Tribunal did not find any infirmity in the impugned order. Accordingly, the same is upheld.
Thus, the Revenue’s appeal is dismissed.
(Pronounced in the open Court on 3-5-2016)

Decision-Appeal dismissed
Comment-The gist of the case is that the assessee sold the goods on FOR destination basis. Till the goods reached the destination, the ownership remained with the consignor. He paid transportation as well as insurance charges. Since place of removal in the instant case is destination of goods, it was held that credit of outward transportation till such place is admissible in accordance with Rule 2(l) of Cenvat Credit Rules, 2004.

Prepared By - Praniti Lalwani

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PJ/Case Law /2016-17/3375

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