Input Tax Credit Cannot Be Claimed For Transportation Services For Transporting Goods From Place Of Removal To Buyer's Premises: Kerala HC
The Kerala High Court held that input tax credit cannot be claimed for the transportation services availed by a company for transporting goods from the place of removal to the buyer's premises.
The Court upheld the decision of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT), which rejected the appellant's contention that it was entitled to avail input tax credit of the tax paid for services availed from goods transport agencies for transporting the products manufactured by it to the premises of the buyer concerned under a contract that was entered on Freight on Road (FOR) basis.
A Division Bench of Justice A.K. Jayasankaran Nambiar and Justice Syam Kumar V.M. found, “Under such circumstances, we fail to see how the appellant can claim input tax credit in respect of the transportation services availed by it for the purposes of transporting the goods from the place of removal to the buyer's premises. In our view, permitting the appellant to avail input tax credit in such circumstances would militate against the very Scheme of CENVAT credit, which is designed to avoid the cascading effect of tax and an ultimate burden on a consumer.”
Senior Advocate Joseph Kodianthara appeared for the appellant, while Standing Counsel Sreelal N. Warrior represented the respondents.
The appellant's case before the authorities was that since the sale was concluded only at the buyer's premises, it was entitled to treat the services availed from the goods transport agencies as an input service in connection with the manufacture and supply of goods to the buyer concerned, and claim an input tax credit under the CENVAT Credit Rules.
CESTAT, however, held that the place of removal of the goods was the appellant's factory, and CENVAT credit on GTA services being available only in respect of services availed up to the place of removal and not beyond it, the claim of the appellant could not be legally countenanced.
The High Court referred to the decision of the Supreme Court in Commissioner of Customs and Central Excise, Aurangabad v. Roofit Industries Ltd. (2015), wherein it was found that in circumstances where a manufacturer entered into a contract with his buyer on FOR basis, the place of removal for the purposes of payment of Central Excise duty had to be seen as the buyer's premises and not the manufacturer's factory.
The Bench explained that in the said finding, it was held that a manufacturer was legally obligated to include the cost of transportation of the goods from the factory to the premises of the buyer in the assessable value of the goods for the purposes of payment of Central Excise duty.
“May be in a factual situation similar to that, the appellant would be justified in contending that on the cost of transportation being included in the assessable value of the goods for the purposes of Central Excise duty, the amount paid to the goods transport agencies, who carried out the transportation, has to be seen as incurred in connection with an input service, for the purposes of claiming input tax credit of the tax paid in relation to the said services,” the Court remarked.
The Court held, “In the instant cases, however, we find that it is the admitted case that the appellant did not include the transportation costs in the assessable value of the goods for the purposes of payment of Central Excise duty.”
Consequently, the Court held, “We therefore see no reason to interfere with the order of the Tribunal impugned in these appeals.”
Accordingly, the High Court dismissed the appeal.
Cause Title: Transformers and Electricals Kerala Ltd. v. The Commissioner Of Central Tax and Central Excise & Anr. (Neutral Citation: 2024:KER:74910)
Appearance:
Appellant: Senior Advocate Joseph Kodianthara; Advocate Abraham Joseph Markos, Isaac Thomas, Alexander Joseph Markos and Sharad Joseph Kodanthara
Respondents: Standing Counsel Sreelal N. Warrior