Goods and Services Tax

No Cenvat credit admissible on outward transportation services from factory to buyer’s premises

Goods and Services Tax – GST – By: – Bimal jain – Dated:- 15-2-2018 Last Replied Date:- 16-2-2018 – Dear Professional Colleague, No Cenvat credit admissible on outward transportation services from factory to buyer s premises We are sharing with you an important judgement of the Hon ble Supreme Court of India in the case of Commissioner of Central Excise & Service Tax Vs. Ultra Tech Cement Limited [ 2018 (2) TMI 117 – SUPREME COURT OF INDIA ] on the following issue: Issue: Whether Goods Transport Agency ( GTA ) services availed for transportation of goods from the place of removal to buyer s premises will be considered as input service within the ambit of Rule 2(l) of the Cenvat Credit Rules, 2004 ( the Credit Rules )? Facts & Background: During the period from January, 2010 to June 2010, M/s. Ultratech Cement Limited ( the Respondent ) availed Cenvat credit of Service tax paid on outward transportation of goods through a transport agency from their premises to the customer s p

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als), matter was decided in favour of the Respondent. The Commissioner (Appeals) allowed the appeal and held that the Respondent is eligible for availment of credit on GTA services on the outward freight from factory to customer s premises as per the Board s Circular 97/8/2007 dated August 23, 2007 ( the Board Circular ). Later on when the Department s appeal at CESTAT and High Court were dismissed, the Revenue filed an appeal to the Hon ble Supreme Court. Observation of the Hon ble Supreme Court: On thread bare analysis of definition of input service contained in Rule 2(l) of the Credit Rules, the Hon ble Supreme Court observed as under: Definition of input service makes it clear that only those services are included in Input services, which are used by the 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 . The original definition of input service contained in Rule 2(l) of the

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s observed that the Adjudicating Authority was right in interpreting Rule 2(l) of the Credit Rules in the following manner: The two clauses in the definition of input service take care to circumscribe input credit by stating that service used in relation to the clearance from the place of removal and service used for outward transportation upto the place of removal are to be treated as input service. The first clause does not mention transport service in particular. The second clause restricts transport service credit upto the place of removal. When these two clauses are read together, it becomes clear that transport services credit cannot go beyond transport upto the place of removal. Extending the credit beyond the point of removal of the final product on payment of duty would be contrary to the scheme of the Credit Rules. Transportation is totally different activity from manufacture and this position remains settled by the judgment of Hon ble Supreme Court in the cases of Bombay Tyr

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is made applicable even in respect of post amendment cases, it would be violative of Rule 2(l) of the Credit Rules and such a situation cannot be countenanced. On the basis of the above discussion and observations, the Hon ble Supreme Court held that Cenvat credit on GTA services availed for transport of goods from the place of removal to buyer s premises was not admissible to the Respondent. Accordingly, the Revenue s appeal was allowed by restoring the Order-in-Original. Our Comments: This is indeed a game changer judgment for the entire trade, as the Hon ble Supreme Court has unsettled the matter by holding that no Cenvat credit will be allowed to the manufacturer in respect of GTA services availed on outward transportation of goods from the place of removal to buyer s premises post April 1, 2008 (Changes brought in definition of input service vide Notification No. 10/2008 – CE (NT) dated March 1, 2008). However, it is to be noted here that few of the manufacturers sell the final pr

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where property in goods passes on to the buyer is relevant to determine place of removal . Now, can we really say that place of removal is factory premises in case of FOR destination sales? Nonetheless, the recent decision of the Hon ble Supreme Court will act as precedent for deciding pending litigations of pre-GST era on the matter of availability of Cenvat credit on outward transportation services. Fortunately, the GST regime will not see such litigations to the extent it allows input tax credit on all input services used in the course or furtherance of business except the negative list items as specified in terms of Section 17(5) of the CGST Act, 2017. Hope the information will assist you in your Professional endeavours. In case of any query/ information, please do not hesitate to write back to us. – Reply By pankaj patwari – The Reply = It therefore translates that there cannot be any place of removal beyond factory or depo? When does the definition of place of removal wrt any ot

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