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No Cenvat credit admissible on outward transportation services from factory to buyer’s premises

Goods and Services Tax - GST - By: - Bimal jain - Dated:- 15-2-2018 Last Replied Date:- 16-2-2018 - Dear Professional Colleague, No Cenvat credit admissible on outward transportation services from factory to buyer s premises We are sharing with you an important judgement of the Hon ble Supreme Court of India in the case of Commissioner of Central Excise & Service Tax Vs. Ultra Tech Cement Limited [ 2018 (2) TMI 117 - SUPREME COURT OF INDIA ] on the following issue: Issue: Whether Goods Trans .....

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pondent alleging wrong availment of Cenvat credit of Service tax amounting to ₹ 25,66,131/- paid on outward transportation of goods from factory to customer s premises, along with interest and penalty. Later on, the Adjudicating Authority upheld the demand holding that once the final product are cleared from the factory premises, extending the credit beyond the point of clearance of final product is not permissible under the Credit Rules. On filing appeal before the Ld. Commissioner (Appea .....

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Credit Rules used the expression from the place of removal . Thus, services used by the manufacturer for clearance of final products from the place of removal to the warehouse or customer s place etc., was exigible for Cenvat credit as decided in the case of Commissioner of Central Excise Belgaum Vs. M/s Vasavadatta Cements Ltd. [Civil Appeal No. 11710 of 2016]. Vide amendment carried out in the Credit Rules w.e.f March 1, 2008, the word from was replaced by the word upto , which has changed the .....

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ansport service credit upto the place of removal. When these two clauses are read together, it becomes clear that transport services credit cannot go beyond transport upto the place of removal. Extending the credit beyond the point of removal of the final product on payment of duty would be contrary to the scheme of the Credit Rules. Transportation is totally different activity from manufacture and this position remains settled by the judgment of Hon ble Supreme Court in the cases of Bombay Tyre .....

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s made applicable even in respect of post amendment cases, it would be violative of Rule 2(l) of the Credit Rules and such a situation cannot be countenanced. On the basis of the above discussion and observations, the Hon ble Supreme Court held that Cenvat credit on GTA services availed for transport of goods from the place of removal to buyer s premises was not admissible to the Respondent. Accordingly, the Revenue s appeal was allowed by restoring the Order-in-Original. Our Comments: This is i .....

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n of final product. Further all the risk associated with the products during transportation from the factory/ depots to dealer s/ customer s premises is fully borne by the manufacturers and hence, transit insurance for the products is the responsibility of the manufacturers. If the above judgment is applied in case of FOR sales, then also Cenvat credit will not be allowed to manufacturers. But, the CBEC earlier vide Circular No. 988/12/2014-CX dated October 20, 2014 had clarified that the place .....

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