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CREDIT CAN BE AVAILED ON GTA OUTWARD FREIGHT?

soni chauhan (Service) (670 Points)

13 November 2009

Any one can send me circullar,judgement or notification in favour of availing service tax on out ward freight which deposited by the manufacturer company ?

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12 Replies

Sorabh Gupta (Manager ( Taxation )) (877 Points)
Replied 13 November 2009

Please be informed that, the definition of "input service" under Rule 2 (l) has been amended in respect of clearance of final products "upto the place of removal" (which was hitherto "from the place of removal") and this is substituted in the Cenvat Credit Rules, 2004, with effect from 1st April, 2008, vide Excise Notification No.10/2008 - CE (N.T) dated 01.03.2008.

In view of the aforesaid Amendment, it appears that, the credit of service tax paid on 'outward transportation' has been restricted "upto the place of removal"., i.e, upto the Factory Gate or in the case of 'Stock Transfer'upto Depot / Dump / C& F Agents premises.

Ram Avtar Singh (Nagari Sultanpur U.P.Delhi) (14477 Points)
Replied 13 November 2009

In this connection, the phrase ‘place of removal’ needs determination taking into account the facts of an individual case and the applicable provisions. The phrase ‘place of removal’ has not been defined in CENVAT Credit Rules. In terms of sub-rule (t) of rule 2 of the said rules, if any words or expressions are used in the CENVAT Credit Rules, 2004 and are not defined therein but are defined in the Central Excise Act, 1944 or the Finance Act, 1994, they shall have the same meaning for the CENVAT Credit Rules as assigned to them in those Acts. The phrase ‘place of removal’ is defined under section 4 of the Central Excise Act, 1944. It states that,-

“place of removal” means-

(i) a factory or any other place or premises of production or manufacture of the excisable goods ;

(ii) a warehouse or any other place or premises wherein the excisable goods have been permitted to be stored without payment of duty ;

(iii) a depot, premises of a consignment agent or any other place or premises from where the excisable goods are to be sold after their clearance from the factory;

from where such goods are removed.”

It is, therefore, clear that for a manufacturer /consignor, the eligibility to avail credit of the service tax paid on the transportation during removal of excisable goods would depend upon the place of removal as per the definition. In case of a factory gate sale, sale from a non-duty paid warehouse, or from a duty paid depot (from where the excisable goods are sold, after their clearance from the factory), the determination of the ‘place of removal’ does not pose much problem. However, there may be situations where the manufacturer /consignor may claim that the sale has taken place at the destination point because in terms of the sale contract /agreement (i) the ownership of goods and the property in the goods remained with the seller of the goods till the delivery of the goods in acceptable condition to the purchaser at his door step; (ii) the seller bore the risk of loss of or damage to the goods during transit to the destination; and (iii) the freight charges were an integral part of the price of goods. In such cases, the credit of the service tax paid on the transportation up to such place of sale would be admissible if it can be established by the claimant of such credit that the sale and the transfer of property in goods (in terms of the definition as under section 2 of the Central Excise Act, 1944 as also in terms of the provisions under the Sale of Goods Act, 1930) occurred at the said place.

Sameer (.) (252 Points)
Replied 13 November 2009

Soni,

Follwoing are the recent judgement allowing cenvat credit of outward freight.

You can find the same free of cost in www.judis.nic.in

Ambuja Cements Ltd Vs UoI (Dated: February 10, 2009) - Punjab & Haryana HC

Abb Ltd. V. CCe (2009) 21 STT 77 = 15STR23 (CESTAT)

Coca Cola Inida V CCE (2009) 22 STT 130 (Bom HC) Division Bench.

Regards

Sameer

Ram Avtar Singh (Nagari Sultanpur U.P.Delhi) (14477 Points)
Replied 14 November 2009

Service Tax Credit on outward freight

Court : Punjab & Haryana High Court

Brief : : ST - Cenvat Credit on Outward Freight - Revenue disallows -held, Assessee is eligible for Credit: High Court

Citation : Ambuja Cements Ltd Vs UoI (Dated: February 10, 2009)

Judgment :

ST - Cenvat Credit on Outward Freight - Revenue disallows -held, Assessee is eligible for Credit: High Court

CHANDIGARH, MAR 04, 2009: IN DDT-599 while reporting the Gujarat Ambuja case (2007-TIOL-539-CESTAT-DEL) - No credit of Service Tax on outward freight - landmark order from Tribunal, we stated, Not everything is lost. The issue has to be taken to a Larger Bench/High Court/Supreme Court. In DDT-601, while reporting that the same issue was before the Bangalore Bench, we suggested, Now what can this Bench do, since there is already a decision by another Bench? It has only two choices – agree with the Delhi Bench or refer the matter to a Larger Bench. That is exactly what the Bangalore Bench did in the India Cement case - 2007-TIOL-1248-CESTAT-BANG.

While the Larger Bench of the CESTAT is yet to decide the issue, the Punjab and Haryana High Court has decided the issue – in favour of the Assessee.

The High Court observed,

The Central Board of Excise and Customs (CBEC) has issued a circular dated 23.8.2007 dealing with the issue concerning ‘up to what stage manufacturer/consigner could take credit on the service tax paid on goods transported by it by road’. The issue, in fact, has emerged out of the order of the Tribunal passed in the case of the appellant itself. The Board has opined that the phrase ‘place of removal’ has to be determined by taking into account the facts of each case. According to the circular, the expression ‘place of removal’ has been defined by Section 4 of the 1944 Act and according to sub-rule (t) of Rule 2 of the CC Rules, if any words or expression used in those rules are not defined but are defined in the 1944 Act or the 1994 Act then they are to be given the same meaning for the CC Rules as assigned to them in those Acts. Accordingly, reliance on Section 4 of the 1944 Act has been made where place of removal has been defined.

It is clear from the definition that for a manufacturer/consignor the eligibility to avail credit of the service tax paid on the transportation during removal of excisable goods would depend upon the place of removal. The circular further contemplates compliance of certain conditions where the sale has taken place at the destination point. The relevant part of the circular reads as under:-

“……However, there may be situations where the manufacturer/consignor may claim that the sale has taken place at the destination point because in terms of the sale contract/agreement (i) the ownership of goods and the property in the goods remained with the seller of the goods till the delivery of the goods in acceptable condition to the purchaser at his door step; (ii) the seller bore the risk of loss of or damage to the goods during transit to the destination; and (iii) the freight charges were an integral part of the price of goods. In such cases, the credit of the service tax paid on the transportation up to such place of sale would be admissible if it can be established by the claimant of such credit that the sale and the transfer of property in goods (in terms of the definition as under section 2 of the Central Excise Act, 1944 as also in terms of the provisions under the Sale of Goods Act, 1930) occurred at the said place.”

It is well settled that the circulars issued by the Board are binding and aims at adoption of uniform practice. It is, thus, evident that the revenue is precluded from challenging the correctness of the circular even on the ground of the same being inconsistent with statutory provisions. It goes further to limit the right of the revenue to file an appeal against the correctness of the binding nature of the circular. Therefore, there is no escape from the conclusion that the circular is binding on the revenue.

The ‘input service’ has been defined to mean any service used by the manufacturer whether directly or indirectly and also includes, inter alia, services used in relation to inward transportation of inputs or export goods and outward transportation up to the place of removal. It has also remain un-controverted that for transportation purposes insurance cover has also been taken by the appellant which further shows that the ownership of the goods and the property in the goods has not been transferred to the seller till the delivery of the goods in acceptable condition to the purchaser at his door step. Accordingly, even the second condition that the seller has to bear the risk of loss or damage to the goods during transit to the destination stand fulfilled.

So the High Court held that the assessee is eligible to take credit on the service tax paid on outward freight – subject to fulfilling the conditions prescribed in the Board Circular.

This is perhaps not the END – the issue is referred to the Larger Bench and also before some more High Courts. The Government has solved the problem for the post 2008 period, can’t they simply accept the position for the pre 2008 period and close all the litigation?

Chirag Patel (Officer) (28 Points)
Replied 16 November 2009

i am workfing with one auttomobile company

we are clear the goods from factory.for the benefit of rule 4 of the valuation rule we shaw freight after excise duty.and transist insurance after transportation. can we take the credit of that outward transportation up to place of dealer

A learner (Corporate Accounts ) (345 Points)
Replied 15 January 2010

Credit can be availed on outward transportation as reinforced by cestat banglore...taking HC ( PUN. & Haryana court) decision as base.

Please comment if you have a different opinion. File Uploaded here for your reference.....sOME RELEVANT extracts are:

Before concluding its observations and holding the issue in favour of the assessees, the Bench also referred to the decision of the Punjab and Haryana High Court 2009-TIOL-110-HC-P&H-ST which overruled the decision of Delhi Bench of CESTAT in Gujarat Ambuja Cements case.

While the decision of the Larger Bench holds good for the period prior to the amendment of the definition of ‘input service’ vide Notification No. 10/2008-CE(NT) dated March 1, 2008 by which the main part of the definition of input service in clause (ii) of sub-rule 2 (l) was amended to replace the words “clearance of final products from the place of removal”, with the words “clearance of final products, upto the place of removal,” what will be the fate of input credit outward transportation after this amendment?

The manufacturers may not get disheartened by this because the Larger Bench while analyzing the definition of ‘input service’ threadbare critically examined the use of certain words and phrases like, ‘business’, ‘relating to’, ‘activities’, ‘activities relating to business’, ‘such as’, and ‘includes’ occurring at various places in the definition of ‘input service’.

While explaining the scope of the phrase ‘activities relating to business’, in the inclusive part of the definition, the Bench observed that the said expression also covers transportation upto the customers place. Relying on the decisions of Apex Court in Mazagaon Docks vs. Commissioner of Income tax and Excess Profits Tax and Doypack Systems (P) Ltd vs. Union of India 2002-TIOL-389-SC-MISC, the Bench observed that the phrase ‘activities in relation to business’ has a wide import irrespective of whether the said activity is an essential activity or an auxiliary activity and even includes the activity of transportation of goods to customers premises.

The Bench further observed that the expression ‘such as’ used in the inclusive clause of the definition means ‘for example’ or ‘of a kind that’ and therefore supports the view that whatever is stated in the inclusive clause of the definition does not restrict the scope of the definition. Also relying on the decision of the Apex Court in Regional Director vs. Highland Coffee Works wherein it was held that the word ‘include’ is generally used to enlarge the meaning of the preceding words, the Bench observed that its usage (‘such as’) in the definition of input service only increases the scope of the definition beyond what is already stated therein.

Summing up the interpretation of these words and phrases, the Larger Bench observed that the credit of tax paid on ‘outward transportation’ cannot be denied by relying on specific coverage of ‘outward transportation upto the place of removal’ as ‘outward transportation’ is also an activity covered by the phrase ‘activities relating to business’ occurring in the inclusive part of the definition. The Bench conclusively held that the definition of ‘input service’ has to be interpreted in the light of the requirements of business and it cannot be read restrictively so as to confine only upto the factory or upto the depot of manufacturers.

Attached File : 23 2009 tiol 830 cestat bang lb outward transportation .pdf downloaded: 334 times

1 Like

Govind Sharan FCA (Consultant) (48 Points)
Replied 20 May 2010

In present scenario after the amendment, cenvat will not be available. Ourward freight upto the place of removal will supersede activity related to business.

Govind Agarwal, Chartered Accountants

9899106682

Govind Sharan FCA (Consultant) (48 Points)
Replied 20 May 2010

In present scenario after the amendment, cenvat will not be available. Ourward freight upto the place of removal will supersede activity related to business.

Govind Agarwal, Chartered Accountants

9899106682

Madhukar N Hiregange (Chartered Accountant) (38934 Points)
Replied 21 May 2010

Dear Sir,

The credit of outward GTA presently has been stayed by the Karnataka HC in the case of ABB Ltd. Till the same is resolved the matter is doubtful. In the meantime it maybe advisable to avail the credit but not to utilise the same and intimate the dept of the same. Reason that not availed due to doubt. Alternatively keep the same in memorandum account and intimate dept that once decision comes the credit for the past period wouldbe availed.

Chirag Patel (Officer) (28 Points)
Replied 23 May 2010

I have one quary that the Owwnership of the goods is lying to up to door of the purchaser. if we charge the transist insurance then owner ship is up to factory gate or door of purchaser

bhaskar (Assistant Manger ) (21 Points)
Replied 27 November 2013

Dear All, We are working an automobile company,now GTA outward we are paying 75 % abatement and 25% we paid and this we can able to avail the benefit.if it is ok can you share the notification details.please help in this regard. Thanks

R.B.POPAT (PRACTICING C.A.) (55 Points)
Replied 08 September 2014

Cenvat credit of Service Tax - Input service - Services availed by manufacturer for outward transportation of final products from the place of removal - Entitlement of manufacturer to take credit of the Service Tax paid on the value of such service - Service Tax and Excise duty being consumption taxes to be borne by the consumer, if credit is denied on transportation service, the levy of Service Tax on transportation will become a tax on business rather than being a consumption tax - Considering the fundamental concept of Service Tax, it cannot be said that Cenvat credit cannot be allowed for service if the value thereof does not form part of the value subjected to Excise duty - Order of Tribunal holding the manufacturer to be entitled to take credit of the Service Tax on the value of transportation service, proper - Rule 2(l)(ii) of Cenvat Credit Rules, 2004 - Section 35G of Central Excise Act, 1944 as applicable to Service Tax vide Section 83 of Finance Act, 1994. [para 5] 2014 (34) S.T.R. 809 (A.P.)