Case Law Details
Star Battery Ltd. Vs Commissioner of Central Tax (CESTAT Kolkata)
In this case, the appellant, a manufacturer of batteries, supplied its products to BSNL and availed Cenvat credit of Service Tax paid on outward freight charges. A Show Cause Notice dated 01.02.2010 was issued for the period from April 2005 to December 2009 on the ground that the appellant was not entitled to claim Cenvat credit on Service Tax paid for outward transportation. The appellant contended that it was eligible for such credit under Rule 2(l) of the Cenvat Credit Rules, 2004. It argued that prior to 01.04.2008, the rule permitted credit on services used for clearance of final products “from the place of removal.” For the period after 01.04.2008, it maintained that it continued to be eligible because it bore the freight and insurance costs and delivered the goods to customers, with ownership passing only at the buyer’s premises. The appellant also challenged the demand on the ground of limitation.
The lower authorities confirmed the demand, and the Commissioner (Appeals) dismissed the appeal as time-barred. However, the Tribunal noted that the appellant had approached the Kolkata High Court, which granted liberty to file an appeal before the Tribunal upon pre-deposit of 25% of the confirmed demand. Since the appellant complied with this condition, the Tribunal declined to reject the appeal on the ground of delay.
The Tribunal examined Rule 2(l) of the Cenvat Credit Rules. It observed that until 31.03.2008, the rule covered services used in the manufacture of final products and their clearance “from the place of removal.” According to the Tribunal, under the unamended provision, Cenvat credit on Service Tax paid on outward freight was available irrespective of whether the place of removal was the factory premises or the buyer’s premises. Consequently, the demand relating to the period from April 2005 to March 2008 was held to be unsustainable and was set aside.
For the period from April 2008 to December 2009, the Tribunal considered whether the appellant had established that the place of removal was the buyer’s premises. The appellant produced purchase orders issued by BSNL showing that it was responsible for bearing freight and insurance costs and for delivering the goods at locations specified by the buyer. The Tribunal found that these documents demonstrated that delivery was required at the buyer’s premises and that the appellant remained responsible for the goods until such delivery. It therefore concluded that the place of removal was the buyer’s premises.
The Tribunal relied upon the decision in Kingfa Science & Technology India Ltd. Vs. Commissioner of GST & Central Excise, which had followed the Larger Bench decision in Ramco Cement. In that case, credit was allowed where goods were sold on an FOR destination basis, freight formed part of the transaction, and ownership passed at the buyer’s premises. Applying the same reasoning, the Tribunal held that the Service Tax paid on freight and insurance services used for transportation from the factory to the buyer’s premises could not be denied. It therefore set aside the impugned order and allowed the appeal on merits.
On the issue of limitation, the Tribunal observed that the appellant was registered under Central Excise and Service Tax laws and regularly filed statutory returns. The details of Cenvat credit availed and utilized were reflected in the returns filed with the department. It also noted that the demand had been quantified using information from the appellant’s Profit and Loss Accounts and Balance Sheets. Based on these facts, the Tribunal held that there was no suppression of facts by the appellant. Accordingly, the extended period of limitation was held to be unavailable, and the demand raised for the extended period was also set aside on grounds of time bar.
The appeal was allowed with consequential relief as per law.
FULL TEXT OF THE CESTAT KOLKATA ORDER
The appellant is the manufacturer of batteries. They clear their finished goods to BSNL. The appellant was availing the Cenvat Credit for the Service Tax paid on the freight charges. On the ground that the appellant was not entitled to claim the Service Tax paid on outward freight charges, a Show Cause Notice was issued on 01.02.2010 for the period April, 2005 to December, 2009. The appellant submitted that they are eligible to take the Cenvat Credit for the Service Tax paid for the freight charges incurred from their factory, in view of the un-amended provisions of Rule 2(l) prior to 01.04.2008. After 01.04.2008 they are eligible for the Cenvat Credit as the delivery is given to the customer at their factory premises by bearing the freight cost and the insurance and the ownership gets passed on there. Therefore, the appellants claimed that they are eligible for the Cenvat Credit for the entire period. They also contested the Show Cause Notice on account of time bar.After due process, the lower authorities confirmed the demand. Being aggrieved, the appellant is before the Tribunal.
2. The Ld. Consultant submits that as per the provisions of Rule 2(l) of Cenvat Credit Rules, 2004 till 31.03.2008, there was no restriction for taking the Cenvat Credit for the Service Tax paid towards clearance of finished goods “from the place of removal”. Therefore, the demand for the period April, 2005 to March, 2008 is not legally sustainable on this ground itself.
3. He further submits that the appellant has been clearing the goods to their customers by paying the freight charges and the appellant was responsible for delivery of the goods at the premises of the customers. He produces copies of the orders issued by BSNL showing that the freight cost and insurance cost is to be borne by the appellant. He submits that this is a transaction where the sale takes place at the end of the buyer. He submits that similar issue had come up before the Chennai Bench in the case ofKingfa Science & Technology India Ltd. Vs. Commissioner of GST & Central Excise wherein the Bench relying on the LB decision of Ramco Cement on the issue, had held that the appellant could be eligible for the Cenvat Credit even after 01.04.2008 since documentary evidence proves that the appellant had borne the freight cost and insurance cost, making it clear that the delivery was effected at the premises of the buyer wherein the ownership got passed on to the buyer.
4. In view of the above submission he prays that the appellant may be allowed on merits.
5. The Ld. Consultant further submits that the appellant is duly registered both for paying the Excise Duty and Service Tax. The appellant has been paying the Excise duty and the Service Tax and they were filing their Returns. Therefore, the Department was aware about the activities of the appellant. Further even the quantification for the demand is based on the Profit and Loss account and Balance Sheet of the appellant. Therefore, suppression cannot be alleged against the appellant. Hence, he prays that the confirmed demand of the extended period may be set aside on account of time baralso.
6. The Ld. Authorized Representative submits that the appellant has filed the appeal before the Commissioner (Appeal) in belated way. Therefore, he has dismissed the appeal on that ground itself. Further she submits that the lower authorities have gone through the factual details and statutory provisions and have correctly confirmed the demand. Hence, she prays that the appeal may be dismissed.
7. Heard both sides. Perused the papers and the submissions made before me.
8. I find that the appellant’s appeal was indeed dismissed by the Commissioner (Appeal) on account of time bar. However, it is seen that the appellant filed their appeal before the Hon’ble Kolkata High Court which has granted the appellant liberty to file their appeal before the Tribunal by pre-depositing 25% of the confirmed demand. The appellant has fulfilled this condition. Accordingly, I do not find any reason to dismiss the appeal on the ground of their delay in filing the appeal before the Commissioner (Appeal).
9. The Rule 2(l) of Cenvat Credit Rules 2004, before and after 01.04.2008 reads as under :
Till 31.03.2008
“(i) used by a provider of [output service] for providing an output service; or
(ii) used by a manufacturer, whether directly or indirectly, in or in relation to the manufacture of final products and clearance of final products from the place of removal.”
From 01.04.2008
“(i) used by a provider of [output service] for providing an output service; or
(ii) used by a manufacturer, whether directly or indirectly, in or in relation to the manufacture of final products and clearance of final products upto the place of removal.”
10. Therefore, as per the statutory provisions till 31.03.2008, the appellant is eligible for the full Cenvat Credit for the Service Tax paid on outward freight charges without any restriction. Whether the place of removal is the factory premises of the appellant [as is being claimed by the Revenue] or it is premises of the recipient as is being claimed by the appellant, in both the cases, the Cenvat Credit will be available. Accordingly, the demand for the period April, 2005 to March, 2008 is not legally sustainable. Hence, the demand for this period is set aside and stands allowed on this ground itself.
11. Coming to the demand made for the period April 2008 to December 2009, the Cenvat Credit can be allowed if it is factually proved that the appellant is delivering the goods to the customer at their door step at the ownership gets passed on to them only at that end. Sample copies of the purchase order issued by BSNL is extracted below:
12. From the above Purchase Order, it is seen that the appellant is required to bear the freight cost and also the insurance cost for delivering the goods at the place specified by BSNL. They are liable to deliver the goods properly at the buyer’s place. This documentary evidence proves that the ‘place of removal’ in respect of the goods is the place wherein the goods are being delivered to the buyers.
13. The Chennai Bench in the case of Kingfa Science & Technology India Ltd. Vs. Commissioner of GST & Central Excise – Final Order No.40574/2026 dated 06.05.2026, has held as under:
6. In the present appeal also the appellant has consistently held that the goods are sold on a FOR destination basis; that the freight charges are an integral part of the invoice and that the risk attached is that of the appellant and not the buyer; that the transfer of property in the final product takes place at the buyers premises. The same has not been found to be wrongly stated by the department. Further in the appellants own case i.e. M/s Hydro S & S Industries Ltd. (earlier name) Vs Commr of C. Ex., Trichirapalli [E/422/2012 dated12.02.2013], this Tribunal found that the goods were delivered at the customers place and that there is no reason to deny the Cenvat credit on GTA services.
7. I find that there is nothing on record to show that the judgment of the Coordinate Bench of this Tribunal in Ramco dated 16.10.24 or Hydros S & S Industries dated 02.2013, have been varied or set aside in favour of Revenue, by a higher forum. In the circumstances credit on the Service Tax paid on the freight and insurance service availed for transportation of the goods from their factory gate to the buyers premises (place of removal), cannot be denied.
14. I find that the ratio of the cited case law is squarely applicable to the facts of the present case. Therefore, I set aside the impugned order and allow the appeal on merits.
15. Considering the appellants arguments on time barred, I find that the appellant is registered with under Central Excise and Service Tax provisions. The details of Cenvat taken are shown in the monthly Returns. The utilization of the same also gets reflected in the ER 1 Returns. Therefore, the appellant’s cenvat credits were very much known to the Dept. Further, the data towards the freight charges and Service Tax thereon has been worked out by using the appellant’s annual P&L Accounts and Balance Sheets. All these facts show that no case of suppression has been made out against the appellant. Therefore, I set aside the confirmed demand for the extended period on account of time bar also.
16. The appeal stands allowed with consequential relief, if any, as per law.
(Pronounced in the open court on 21.05.2026)
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