Buyer’s Premises May Qualify as Place of Removal in FOR Contracts: CESTAT Chennai

Ramco Cements Limited Vs Commissioner of GST and Central Excise (CESTAT Chennai)

CESTAT Chennai remanded the appeals filed by the assessee concerning eligibility of CENVAT credit on outward Goods Transport Agency (GTA) services used for transportation of cement sold on FOR destination basis. The dispute related to periods from May 2016 to June 2017, during which the Department disallowed CENVAT credit amounting to ₹45.95 lakh and ₹38.43 lakh on the ground that outward transportation beyond the factory gate or depot was not eligible as “input service”.

The assessee contended that cement was sold on FOR destination basis and that ownership in the goods transferred only upon delivery at the customers’ premises. Therefore, according to the assessee, the buyers’ premises constituted the “place of removal”, making the outward GTA service eligible for CENVAT credit. The Department, however, treated the factory gate or depot as the place of removal and denied the credit.

The matter had previously been remanded by the Tribunal for determination of the “place of removal” in light of the Supreme Court decisions in Roofit Industries and related rulings. Even after remand, the adjudicating authority again concluded that the place of removal was the factory gate or depot, leading to further appeals.

Before the Tribunal, the assessee relied on the Larger Bench decision in its own case, which held that in FOR contract cases, authorities must determine the “place of removal” by applying the principles laid down in Supreme Court judgments including Emco and Roofit Industries, the Karnataka High Court decision in Bharat Fritz Werner, and the CBIC Circular dated 08.06.2018. The assessee also relied on subsequent decisions of the Tribunal and High Courts holding that where freight charges are included in the assessable value and goods are sold on FOR basis, CENVAT credit on outward transportation may be admissible up to the place of removal.

The Tribunal observed that the issue was no longer res integra in view of the Larger Bench ruling. It noted that if the buyers’ premises are found to be the place of removal, then credit on outward GTA services would be available. The Tribunal also took note of the assessee’s submissions that agreements with transporters and customers, along with invoices, indicated that the sales were on FOR destination basis and that goods were required to be delivered at customers’ premises.

Referring to earlier orders passed in the assessee’s own cases, the Tribunal stated that such agreements and invoices required verification to determine the actual place of removal. It reiterated that where freight forms part of the assessable value for payment of excise duty, the corresponding service tax paid on freight charges may qualify for CENVAT credit.

Accordingly, the Tribunal remanded the matter to the adjudicating authority for verification of the documents and fresh determination of the place of removal. It held that the assessee would be entitled to CENVAT credit if, upon verification, the buyers’ premises are found to be the place of removal. The appeals were allowed by way of remand.

FULL TEXT OF THE CESTAT CHENNAI ORDER

M/s. The Ramco Cements Ltd., Ariyalur (the Appellant herein) have filed these two Central Excise Appeals Nos. E/40346&40347/2021, assailing the Orders-in-Appeal Nos. 17&18/2021 dated 01.04.2021 passed by the Commissioner of GST and Central Excise (Appeals), Tiruchirapalli, wherein it was held that the appellants were not eligible for the CENVAT credit availed on the outward Goods Transport Agency Services. As both the appeals involve an identical issue of eiligibility of CENVAT credit on outward Goods Transport Agency Service, these are being taken up together for disposal by this common order.

2.1 The details of the appeals filed in this regard are given as below:-

2.2 The appellants are the manufacturers of cement and have availed CENVAT credit of service tax paid on outward Goods Transport Agency (GTA) Services where the cement was sold on FOR destination basis. The Appellants were of the view that as the place of delivery is at the dealer’s premises, they are eligible for the CENVAT credit of service tax paid on GTA Services which they paid under reverse charge mechanism.

2.3 This availment of CENVAT credit on outward GTA was objected to by the Jurisdictional Departmental Officers, resulting in issuance of SOD No. 06/2018 dated 07.06.2018 and SOD No. 07/2018 dated 18.06.2018 in order to recover the wrong CENVAT credit availed on the outward GTA Services. After due process of the law, the SODs were adjudicated and the entire credit availed i.e, Rs.45,95,157/- and Rs.38,43,060/- respectively was disallowed by the Original Adjudicating Authority vide Order-in-Original Nos. 27&28/2018 dated 22.11.2018. As the appellants were aggrieved by the Orders passed by the Original Adjudicating Authority, they filed appeals before the Commissioner of Central Excise (Appeals) who have confirmed the order of the Original Adjudicating Authority, rejecting the appeals filed by the assessee. The appellants have filed further appeals to CESTAT Chennai and the Tribunal vide its Final Order Nos. 41043-41044/2019 dated 09.09.2019 had set aside the order of Commissioner of Central Excise (Appeals) and remanded the case to the Original Adjudicating Authority to determine the ‘place of removal’ and decide the applicability of Hon’ble Supreme Court’s decision in the case of Commissioner of Customs and Central Excise, Aurangabad Vs. M/s. Roofit Inustries Ltd. [2015 (319) ELT 221 (SC)] and Final Orders passed by the Tribunal in the case of Genau Extrusions Ltd. Vs. Commissioner of GST and Central Excise, Salem [2019-7-TMI-325-CESTAT Chennai]. Even in the remand proceedings, the Original Authority vide Orders Nos. 01&02/2020-ST dated 19.05.2020 have concluded that the place of removal in the appellants’ case was that of their factory gate or Depots and the appellant not eligible for the CENVAT credit availed for the outward GTA Services.

2.4 The appellants again filed appeals before the Appellate Authority who vide Orders-in-Appeal Nos. 17&18/2021 dated 01.04.2021 confirmed the orders of the Lower Adjudicating Authority. Hence, these appeals came to be filed before this forum.

3.1 The Ld. Consultant Shri R. Parthasarathy representing the appellant has referred to the Larger Bench decision in their own case viz., M/s. The Ramco Cements Limited Vs. The Commissioner of Central Excise, Pondicherry [Interim Order No. 40020/2023 date 21.12.2023] wherein it was observed in paragraph 35 of the Order as follows: –

“35. In the result, in a case where clearances of goods are against FOR contract basis, the authority needs to ascertain the ‘place of removal’ by applying the judgments of the Supreme Court in Emco and Roofit Industries, the decision of the Karnataka High Court in Bharat Fritz Werner, and the Circular dated 08.06.2018 of the Board to determine the admissibility of CENVAT credit on the GTA Service upto the place of removal.”

3.2 The appellant has further submitted that even after the amendment of the definition of the ‘Input Service’ in cases where goods were sold on FOR basis was not their factory gate or depot but the place of removal in their case, was that of the customers’ places where the cement sold was delivered. He has referred to the Hon’ble Apex Court’s decision in Commissioner of Central Excise & Service Tax Vs. Ultra Tech Cement Limited [2018 (9) GSTL 337 (SC)], wherein it was held that the GTA credit would not be eligible beyond the factory gate but the main issue as to what would be the place of removal in the case of goods sold on FOR destination basis was not discussed therein. It was argued further that in their case all cement bags and bulk cement were sold on FOR basis and so, the property in the goods got transferred only after the cement bags in good condition were delivered to their customers and as such the place of removal was only that of their customers’ premises.

3.3 He has put forth that they have satisfied the guidelines prescribed in the Board’s Master Circular No. 97/6/2007-ST dated 23.08.2007. It was further submitted that in pursuant to the ruling of Hon’ble Apex Court in the case of Ultra Tech Cement Limited supra, CBI&C by their Circular No. 1065/4/2018-CX dated 08.06.2018, clarified that all pending cases are required to be finalised after taking into account the factual details in terms of the Master Circular dated 23.08.2007. The appellant has referred to the decision of Hon’ble Supreme Court in the case of Ultra Tech Cement Limited supra which was considered by the Hon’ble High Court of Karnataka in the case of Bharat Fritz Werner Ltd. Vs. Commissioner of Central Excise, Bangalore [2022-66-GSTL-434-Kar.] wherein the Hon’ble High Court made the following observation: –

“17. The Ministry of Finance (Department of Revenue) Central Board of Indirect Taxes and Customs, New Delhi, has issued Circular dated 8­6-2018 and clarified the definition, ‘Place of Removal’. In Para 5 of the Circular, the Ministry has referred to the judgment in the case of CCE & ST v. Ultra Tech Cement Ltd. [Civil Appeal No. 11261 of 2016, dated 1-2-2018] [2018 (9) G.S.T.L. 337 (S.C.)] and stated that, in that case, the Apex Court has held that Cenvat credit on GTA Service from the place of removal to the buyer’s premises is not admissible.

18. In the instant cases, the place of removal is buyer’s premises. Therefore, the authority in the case of Madras Cements Ltd., is applicable to the facts of this case and these appeals merit consideration.”

3.4 The appellants further has submitted that the identical issue came up for disposal before Himachal Pradesh High Court in the case of Inox air Products Pvt. Ltd. Vs. Assistant Commissioner of Central Excise and Service Tax division and the High Court made the following observations while setting aside the order of the Hon’ble CESTAT.

“37. Reliance was also placed by the Tribunal on its Larger Bench Division in M/S Ramco Cements Ltd. Vs CCE, Puducherry dated 21.12.2023 wherein the Larger Bench has held that the credit availed on Outward Transportation Services is eligible when the freight charges are included in the taxable value.

38. Therefore, we hold on issues mentioned above that the Tribunal was not justified in holding that place of removal for GTA services provided under F O R sale contract is the manufacturer’s premises and not the place where the goods are sold: That the Tribunal was not justified in holding that the GTA services in the present case are being received beyond the place of removal and therefore not covered within the “Input Services” under 2 (l) of CENVAT Credit Rules, 2004.

39. Accordingly, the appeal is allowed and the impugned orders are set aside. “

3.5 The appellants also rely upon Hon’ble Division Bench’s final order 40201/2024 dated 22.2.2024 wherein on similar set of facts, it was held that CENVAT credit availed on outward transportation services is eligible when the freight charges are included in the taxable value. The appellants have submitted that the division Bench made the following observations: –

“6. Recently, the Larger Bench, in the case of Ramco Cements Ltd. Vs CCE, Puducherry (Appeal No: E/40575/2018 dated 21.12.2023) had held that the credit availed on outward transportation services is eligible when the freight charges are included in the taxable value. We therefore, find that the disallowance on Input Service and the confirmation of the demand without basis are required to be set aside.”

3.6 The appellants has also submitted that the identical issue relating to the other plants located in Tamil Nadu, came up before Hon’ble Division Bench, Chennai and vide Final Orders cited hereunder, the issue was remanded to the original authorities for re determination of place of removal in the context of the observations made by the Larger Bench, following the rulings of the Hon’ble Supreme Court and the Hon’ble High Court of Karnataka.

i. E/40812/2024 dated 8.7.2024

ii. E/40835/2024 dated 10.7.2024

iii. E/40843/2024 dated 10.7.2024

iv. Final Order No: FO/A/411175/2024 Ex (DB) dated 4.9.2024

v. Final Order No: FO/A/41183-41191/2024 EX (DB) dated 4.9.2024

3.7 It is submitted that as Cement bags were sold on FOR destination basis, the place of removal in their case was that of their Customers’ places as per the rulings of the Apex Court in Roofit Industries case and Karnataka High Court in the case of Bharat Fritz Warner Ltd. and accordingly the transportation of cement from their Factory/Depot to their customers place was an “input service”. Therefore, CENVAT credit taken for GTA Services for the entire period were in order.

3.8 The appellant has prayed for remanding the case to the Lower Adjudicating Authority for passing necessary orders on their eligibility of CENVAT credit on the outward GTA Services after determining the place of removal.

4. The Ld. Authorised Representative Smt. Anandalakshmi Ganeshram representing the Department have affirmed the findings in the impugned order dated 01.04.2021.

5. Heard both sides and have examined the Larger Bench decision and other decisions referred supra and also the Tribunal, Chennai decisions in the appellants’ own cases.

6. The issue that has to be decided in these appeals is whether the appellant is eligible to avail CENVAT credit on the outward GTA Services.

7. The issue is no more res integra as the same has been finally decided by the Larger Bench vide M/s. The Ramco Cements Limited Vs. The Commissioner of Central Excise, Pondicherry [Interim Order No. 40020/2023 date 21.12.2023] wherein it was held as follows: –

“35. In the result, in a case where clearances of goods are against FOR contract basis, the authority needs to ascertain the ‘place of removal’ by applying the judgments of the Supreme Court in Emco and Roofit Industries, the decision of the Karnataka High Court in Bharat Fritz Werner, and the Circular dated 08.06.2018 of the Board to determine the admissibility of CENVAT credit on the GTA Service upto the place of removal.

36. The reference is answered accordingly. The appeal shall now be listed before the Division Bench for hearing.”

8. From the appeal records, it is evident that in the case of Commissioner of Central Excise & Service Tax Vs. Ultra Tech Cement Limited [2018 (9) GSTL 337 (SC)], the Hon’ble Apex Court had held that credit of service tax paid for outward transportation of goods is not eligible. The Board vide Circular No. 1065/4/2018-CX dated 08.06.2018 had issued a clarification wherein it was stated that the place of removal has to be determined as per the decision of the Hon’ble Supreme Court in the case of M/s. Commissioner of Customs and Central Excise, Aurangabad Vs. Roofit Industries Ltd. [2015 (319) E.L.T. 221 (S.C.)] and in the case of Commissioner of Central Excise Vs. Ispat Industries Ltd. [2015 (324) ELT 670 (SC)]. If the buyer’s premises is the place of removal, the appellant would be eligible for credit. The very same issue was referred to the Larger Bench and as per the decision of the Larger Bench vide Interim Order No. 40020/2023 dated 21.12.2023, it was held that in a case where clearances of goods are against FOR contract basis, the Department has to ascertain the place of removal by applying the judgments of the Supreme Court in Commissioner of Central Excise, Mumbai-III Vs. Emco Ltd. [2015 (322) ELT 394 (SC)] and Roofit Industries Ltd. (supra) and also the decision of the Karnataka High Court in Bharat Fritz Werner Ltd. CCT, Bangalore [2022 (66) GSTL 434 (Kar.)] and as well as the Board Circular dated 08.06.2018 to determine the admissibility of CENVAT credit on outward transportation of goods upto the place of removal.

9. Considered the Ld. Consultant’s submissions that the Agreements entered into between the appellant and the transporters as well as the agreements with the customers / dealers would show that the sale was on FOR destination basis. The invoices also would show that the goods were to be delivered at the buyers’ premises. Under these circumstances, the buyers’ premises is the place of removal and so, the appellant is eligible for credit.

10. Further, in the appellant’s own case M/s. The Ramco Cements Limited Vs. Commissioner of GST and Central Excise [F.O.No. 40843/2023 dated 10.07.2024], the Tribunal Chennai had recently held as follows: –

“5. The issue to be decided is whether the appellant is eligible for credit of service tax paid on outward transportation of goods upto the place of removal. There has been much litigation on this issue. Recently, the Larger Bench of the Tribunal vide Interim Order No. 40020/2023 dated 21.12.2023 held that the place of removal has to be ascertained by applying the judgments of the Hon’ble Supreme Court in the case of Emco (supra), Roofit Industries Ltd. (supra) as well as the decision of the Hon’ble High of Karnataka in the case of Bharat Fritz Werner Ltd. (supra). The Board Circular dated 08.06.2018 is also applicable to decide the admissibility of CENVAT credit. The relevant paragraph reads as under:-

“35. In the result, in a case where clearances of goods are against FOR contract basis, the authority needs to ascertain the ‘place of removal’ by applying the judgments of the Supreme Court in Emco and Roofit Industries, the decision of the Karnataka High Court in Bharat Fritz Werner, and the Circular dated 08.06.2018 of the Board to determine the admissibility of CENVAT credit on the GTA Service upto the place of removal.”

6. The Ld. Consultant has submitted that the sale was on FOR basis, the place of removal is the buyer’s premises. Various agreements as well as the invoices have been placed before us. However, these documents require to be verified, to ascertain the place of removal. Needless to say, if the contracts are on FOR basis, the appellant is eligible for CENVAT credit of service tax paid upto the place of removal for the disputed period. In other words if the freight element is included in the assessable value for payment of excise duty, the credit of service tax paid on such freight charges is eligible.

7. n the appellant’s own case vide Final Order No. 41027/2023 dated 07.11.2023, the Tribunal had considered the definition of input services prior to 01.04.2008 as well as after 01.04.2008 and held that the credit is eligible.

8. In such circumstances, we are of the considered opinion that the matter requires to be remanded to the Adjudicating Authority who is directed to verify the documents and ascertain the place of removal. In case buyer’s premises is the place of removal, the appellant would be eligible for credit. The decision of the Tribunal passed in the appellant’s own case dated 07.11.2023 as well as the decision of the Larger Bench would be applicable.”

11. In compliance with the judicial discipline and appreciating the above decisions cited supra, these appeals are allowed by way of remand to the Lower Adjudicating Authority who is directed to verify the documents and ascertain the place of removal. The appellant would be eligible for the CENVAT credit, in case, the Buyer’s premises is the place of removal. The decision passed by the Tribunal in their own case as well as the Larger Bench decision vide [Interim Order No. 40020/2023 date 21.12.2023] would be applicable.

(Order pronounced in open court on 16.10.2024)