CESTAT Mumbai Allows CENVAT Credit On GTA Services In FOR Contract, Holds Buyer's Premises As Place Of Removal

The Mumbai Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has allowed CENVAT credit on Goods Transport Agency (GTA) services used for outward transportation, holding that where goods are supplied on FOR (Free on Road) destination basis, the buyer's premises can be treated as the “place of removal."

A single-member coram comprising Judicial Member Ajay Sharma dealing with an appeal filed by Gnat Foundry Pvt. Ltd. challenging the denial of CENVAT credit on GTA services used for transporting goods to customers' premises.

The core issue before the Tribunal was whether the appellant was entitled to avail CENVAT credit of service tax paid on GTA services for outward transportation up to the customer's premises.

The department had denied the credit by relying on the Supreme Court's decision in CCE v. Ultratech Cement Ltd., contending that outward transportation beyond the place of removal is not eligible for credit.

However, the Tribunal noted that the issue is no longer res integra in light of the Larger Bench decision in Ramco Cements Ltd., which clarified that determination of the “place of removal” depends on the facts of each case, especially in FOR contracts.

On facts, the Tribunal found that the purchase orders clearly stipulated FOR door delivery, and payment was to be made only upon receipt of goods at the buyer's premises in proper condition. This showed that the sale was completed at the buyer's premises, thereby making it the “place of removal”.

Relying on Section 4 of the Central Excise Act, 1944 and Rule 2(l) of the CENVAT Credit Rules, 2004, the Tribunal held that GTA services used up to the place of removal qualify as “input service”.

Consequently, the court observed,

"In the light of the aforesaid discussions and settled legal position, I am of the view that in the facts of the present case, the customer's premises constituted the place of removal. Accordingly, the GTA service availed for outward transportation of finished goods up to the customers premises qualify as input service under Rule 2(l). The appellant has rightly availed CENVAT Credit of Service Tax on GTA service."

Accordingly, it concluded that the appellant had rightly availed CENVAT credit and set aside the impugned order.

For Appellant: Advocate J N Somaiya,

For Respondent: Shri Rajiv Ranjan, AC (AR) for the respondent