Whether denial of credit on outward GTA justifiable on ground that insurance policy taken was general and not buyer specific?

PJ/Case Law/2013-14/2080

Case:- HYDRO S & S INDUSTRIES LTD. V/S COMMISSIONER OF C. EX., TRICHIRAPALLI

Citation:- 2014 (33) S.T.R 402 (TRI.– CHENNAI)

Brief Facts:- The appellant is engaged in the manufacture of PP mineral moulding compound, TPE compounds in the primary form and nylon mineral compound. They availed cenvat credit on inputs, capital goods and input services. It has been alleged that during the period from Oct’ 09 to Aug’ 10, the appellant availed service tax credit of Rs. 1,74,701/-paid on outward transportation of goods under GTA service. Adjudicating authority confirmed the demand of Rs. 1,74,701/- under Rule 14 of Cenvat Credit Rules, 2004 read with section 11A (2) of the Central Excise Act, 1944 along with interest under section 11AB of this Act & penalty of equal amount u/s 11AC of the Act. Commissioner (appeals) upheld the adjudication order. Hence, the appellant has filed appeal to the Tribunal.

Appellant’s Contention:-The advocate for the appellant contends that in the present case , the place of removal is customer’s premises. In this context, she drew the attention of the bench to the purchase order, insurance policy and invoice etc. Accordingly, she pleaded that credit of service tax paid on outward GTA was admissible.

Respondent’s Contention:- The learned authorized representative on behalf of revenue reiterated the findings of the Commissioner (Appeals). He submits that issue has been decide by the tribunal in the case of MADRAS CEMENT LTD.V/S COMMISSIONER OF CENTRAL EXCISE, BANGLORE REPORTED IN 2012 (27) S.T.R. 470(TRI.-BANG). He submits that insurance policy paid by the appellant would not cover particular transportation of goods. He further submits that in this case, place of removal is the factory gate of appellant – company and the tribunal decided that after 31-3-2008, tax on GTA service would not be applicable beyond the factory gate. He also relied upon the stay order of the tribunal in the case of PMP AUTO COMPONENTS (P) LTD. V/S COMMISSIONER OF CENTRAL EXCISE , MUMBAI-V REPORTED IN 2012 (284) E.L.T. 536 (TRI.- MUMBAI) .

Reasoning of Judgment:- After hearing both sides and on perusal of the records, it is find that the tribunal in the case of MADRAS CEMENT LTD.(SUPRA) held that after the amendment of Rule 2(l) of CENVAT Credit Rules on 21-3-2008, the definition of “Input Service” means”any service used by the manufacturer of final products, whether directly or indirectly, in or in relation to the manufacture of final product and clearance of the final product upto the place of removal is an input service”, on which credit would be eligible.
The contention of the learned counsel for the appellant is that in this case, the place of removal is the customer’s premises. It is seen that place of delivery is the customer’s works and the freight charges was also included. The freight was also paid by the appellant.

On the other hand the adjudicating authority observed that the insurance policy has not mentioned in particular transportation to a buyer & which is only open & general in nature but there is no force in such finding. There is no such requirement that each consignment would cover separate policy. In other words, it is required that insurance policy must be in the name of appellant to claim the benefit of policy in respect of transportation of goods.

The case law relied upon by the authorized representative in the case of PMP AUTO COMPONENTS (P) LTD. (SUPRA) is a stay order. In that case, it was an export contract and the goods have to be delivered at the exporter’s premises abroad, which is not applicable in the facts of the present case. It is clearly evident from the documents placed by the appellant that the goods were delivered at the customer’s premises. Hence, there is no reason to deny the cenvat credit on GTA service.
In view of the above discussion, the denial of credit is not sustainable. Accordingly, the impugned orders are set aside and the appeal is allowed with consequential relief.

Decision:- Appeal allowed.

Comment:- The crux of this case is that the credit of service tax paid on outward GTA cannot be denied merely on the grounds that the insurance policy taken by the assessee was not specific to the buyer to whom goods were sold and was open and general in nature. The only conditions to be satisfied for availing the credit of service tax on outward GTA is that delivery must be at the buyer’s premises, risks and ownership remains with the manufacturer assessee and the freight should form integral part of the assessable value of the goods. As far as all the said conditions are satisfied, credit of the service tax paid on GTA service would be admissible.

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PJ/Case Law/2013-14/2080

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