CA Nischal Agarwal
CENVAT Credit of Service Tax paid on ‘Outward Transportation’ upto ‘Place of Removal’
Reliance in this connection can be placed on the decision of Hon’ble Chennai Tribunal in case of ITC Limited vs CCEx [Order No. 40353-40379/2016] wherein the basic question which came up for consideration was eligibility of CENVAT Credit of Service Tax paid on outward transportation of goods upto place of removal. In the instant case, the appellant was denied CENVAT Credit of service tax paid on outward transportation service by the revenue on the premise that such transportation charges are post clearance expenses and therefore cannot be considered as ‘Input Service’.
It would be pertinent to note that outward transportation upto place of removal is treated as ‘Input Service’ in terms with Rule 2(l) of CENVAT Credit Rules, 2004 and therefore eligible for CENVAT Credit. It is imperative to understand the meaning of place of removal for the purpose of understanding the eligibility of CENVAT Credit on such service. Place of removal is defined under Rule 2(qa) of CCR’04 and it is the place wherein property in goods passes to the buyer from the seller. Section 19 of Sale of Goods Act, 1930 provides that:
a) Where there is a contract of sale, the property in goods passes at such time as the parties to the contract intend it to be transferred
b) Such intention shall be ascertained giving regard to terms of contract, conduct of parties and shall vary on the basis of the circumstances of the case.
The afore-said provision has been expounded by Hon’ble Board by way of various circulars issued explaining as to how to construe the meaning of the term place of removal. The key take aways of such circulars issued by Hon’ble Board which are in line with Sale of Goods Act, 1930 are mentioned here-in-below –
a) In case of export, it is the responsibility of the Shipping line to ship the goods to the foreign buyer with the exporter having no control of the goods. Therefore, in such case, transfer in property can be said to have been taken place at the port where shipping bill is filed by the manufacturer exporter.
b) In case of domestic sale, the seller delivers the goods to the buyer or to the carrier or to bailee or any other person without reserving the right of disposal, it shall be deemed that the property in goods have been transferred at the time of passing the possession of the goods.
The Ld. Counsel appearing on behalf of the assesse placed reliance on the decision of Hon’ble Tribunal in case of Western Agencies (P) Limited [2011 (22) STR 305 (Tri-LB)] wherein CENVAT Credit was allowed on C&F and CHA Services and pleaded that such denial of CENVAT Credit stating that transportation service is pertaining to post clearance and therefore cannot be considered as ‘Input Service’ is bad in law.
The Hon’ble Tribunal discussed the afore-said and directed the revenue to dispose off the claim of CENVAT Credit on such service keeping in mind the afore-said guidelines and after examining relevant evidences produced by the assesse at the time of adjudication.