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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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emises. According to the Revenue, the transport agency service used by the Respondent for transportation of their final product from their premises to customer s premises cannot be considered to have been used directly or indirectly in relation to clearance of goods from the factory viz., place of removal in terms of Rule 2(I) of the Credit Rules and as such cannot be considered as input service to avail Cenvat credit. Accordingly, a show cause notice dated February 3, 2011 was issued to the Res .....

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ls), matter was decided in favour of the Respondent. The Commissioner (Appeals) allowed the appeal and held that the Respondent is eligible for availment of credit on GTA services on the outward freight from factory to customer s premises as per the Board s Circular 97/8/2007 dated August 23, 2007 ( the Board Circular ). Later on when the Department s appeal at CESTAT and High Court were dismissed, the Revenue filed an appeal to the Hon ble Supreme Court. Observation of the Hon ble Supreme Court .....

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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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observed that the Adjudicating Authority was right in interpreting Rule 2(l) of the Credit Rules in the following manner: The two clauses in the definition of input service take care to circumscribe input credit by stating that service used in relation to the clearance from the place of removal and service used for outward transportation upto the place of removal are to be treated as input service. The first clause does not mention transport service in particular. The second clause restricts tr .....

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International [ 1983 (10) TMI 51 - SUPREME COURT OF INDIA ], Indian Oxygen Ltd. [ 1988 (7) TMI 58 - SUPREME COURT OF INDIA ] and Baroda Electric Meters [ 1997 (7) TMI 126 - SUPREME COURT OF INDIA ]. The Board Circular dated August 23, 2007 was issued in clarification of the definition of 'input service' as existed on that date i.e. it is related to un-amended definition. Further, the issue was examined after keeping in mind judgments of CESTAT in Gujarat Ambuja Cement Ltd. and M/s. Ultr .....

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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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duct to the dealers/ customers on Free on Road ( FOR ) destination basis which can be substantiated from the terms and conditions of agreement/ purchase order between the manufacturers and the dealers/ customers. In terms of agreement, the manufacturers are required to arrange for transportation and delivery of the goods at the dealer s/ customer s premises. The price charged by the manufacturer is inclusive of freight and nothing is charged separately on account of freight towards transportatio .....

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