The Customs, Excise & Service Tax Appellate Tribunal, Chennai, has clarified that CENVAT credit on goods transport agency and insurance services is permissible when goods are sold on a FOR destination basis, with the buyer’s premises constituting the place of removal. This decision reinforces the principle that eligibility for input service credit hinges on contractual terms and physical transfer of risk, not merely the nature of the service.
Background & Facts
The Dispute
The appellant, M/s. Kingfa Science & Technology India Ltd. (formerly M/s. Hydro S&S Industries Ltd.), manufactures reaffirmed/filled polypropylene under Chapter 39 of CETA. During a verification of its records, the department identified that the appellant had availed CENVAT credit on services including Security Service, Rent-a-Cab Service, Goods Transport Agency (GTA) Outward Transportation, Outward Courier Service, and Insurance Service for transportation of goods. The department issued seven Show Cause Notices proposing to deny credit and demand Rs. 8,78,146 in CENVAT credit, later confirming a demand of Rs. 8,27,006 for outward transportation, courier, and insurance services, while allowing credit for security and rent-a-cab services. A penalty of Rs. 82,701 was imposed under Rule 15(1) of the CENVAT Credit Rules, 2004.
Key Facts
- The appellant sold goods on a FOR (Free On Road) destination basis, meaning the risk and cost of transportation remained with the seller until delivery at the buyer’s premises.
- Invoices clearly indicated delivery at the buyer’s location, with freight charges included in the assessable value for excise duty.
- The appellant had previously been granted CENVAT credit for similar transactions under its former name, M/s. Hydro S&S Industries Ltd., in Order E/422/2012 dated 12.02.2013.
- The appellant contended that since the place of removal was the buyer’s premises under FOR contracts, credit for transportation and insurance services was legally admissible.
- The department relied on the Supreme Court’s judgment in Commissioner of Central Excise and S.T. v. Ultra Tech Cement Ltd. [2018 (9) GSTL 337 (SC)] to deny credit.
Procedural History
- 2009 - 2010: Period under scrutiny for availed CENVAT credit on GTA, courier, and insurance services.
- 2017: Seven Show Cause Notices issued by the department.
- 14.08.2017: Commissioner of GST & Central Excise (Appeals - I), Chennai, passed Order No. 54/2017, confirming demand and penalty.
- 2017: Appeal filed before CESTAT Chennai (Excise Appeal No. 42294 of 2017).
- 17.04.2026: Hearing held before CESTAT Chennai.
- 06.05.2026: Final Order No. 40574/2026 passed.
The Parties' Positions
For the Appellant
- Argued that under FOR contracts, the place of removal is the buyer’s premises, making transportation and insurance services eligible input services.
- Relied on its own prior favorable order (E/422/2012) and the Tribunal’s recent decision in Ramco Cements Ltd. (Final Order Nos. 41290 & 41291/2024 dated 16.10.2024).
- Contended that the department failed to disprove the contractual terms and invoice evidence.
- Asserted that delay in adjudication and keeping the case in CALL BOOK was improper.
For the Respondent
- Relied on Ultra Tech Cement Ltd. (2018) to argue that CENVAT credit on outward transportation services is not admissible regardless of contractual terms.
- Maintained that the place of removal is the manufacturer’s premises, and services beyond that are not eligible.
- Did not dispute the existence of FOR contracts but argued that Supreme Court precedent overrides contractual interpretation.
Relief Sought
The appellant sought: (1) setting aside of the impugned order dated 14.08.2017; (2) restoration of CENVAT credit for GTA, courier, and insurance services amounting to Rs. 8,27,006; (3) cancellation of penalty of Rs. 82,701; and (4) direction to the adjudicating authority to verify contractual documents and determine the place of removal.
The Legal Issue
The central question was whether CENVAT credit on Goods Transport Agency (GTA) and insurance services is admissible when goods are sold on a FOR destination basis and the buyer’s premises constitutes the place of removal, despite the Supreme Court’s ruling in Ultra Tech Cement Ltd.
Arguments Presented
For the Appellant
The appellant relied on the Tribunal’s own precedent in Ramco Cements Ltd. (Final Order Nos. 41290 & 41291/2024) and its earlier favorable order (E/422/2012), arguing that the place of removal under FOR contracts is the buyer’s premises. It cited the Board’s Circular No. 1065/4/2018-CX dated 08.06.2018, which directs authorities to determine the place of removal by applying the Supreme Court’s judgments in Emco Ltd., Roofit Industries Ltd., and Bharat Fritz Werner Ltd. The appellant emphasized that if freight charges are included in the assessable value for excise duty, credit for the corresponding transportation services must be allowed. It further argued that the department had not challenged the authenticity of its contracts or invoices.
For the Respondent
The respondent relied exclusively on the Supreme Court’s decision in Ultra Tech Cement Ltd., contending that it laid down a blanket prohibition on CENVAT credit for outward transportation services. It argued that the Tribunal’s subsequent decisions in Ramco Cements Ltd. and the appellant’s own case were either distinguishable or not binding. The Revenue maintained that the place of removal is always the manufacturer’s premises under the CENVAT Credit Rules, 2004, irrespective of contractual terms.
The Court's Analysis
The Tribunal acknowledged the Supreme Court’s ruling in Ultra Tech Cement Ltd. but noted that a Larger Bench of this Tribunal, in Ramco Cements Ltd. (Interim Order No. 40020/2023 dated 21.12.2023), had clarified that the Ultra Tech judgment does not preclude credit where the buyer’s premises is the place of removal under a FOR contract. The Larger Bench held that the place of removal must be determined by applying the Supreme Court’s decisions in Emco Ltd., Roofit Industries Ltd., and the Karnataka High Court’s judgment in Bharat Fritz Werner Ltd., along with Board Circular No. 1065/4/2018.
"In the result, in a case where clearances of goods are against FOR contract basis, the authority needs to ascertain the 'place of removal' by applying the judgments of the Supreme Court in Emco and Roofit Industries, the decision of the Karnataka High Court in Bharat Fritz Werner, and the Circular dated 08.06.2018 of the Board to determine the admissibility of CENVAT credit on the GTA Service upto the place of removal."
The Tribunal further noted that the appellant’s own prior case (E/422/2012) had already recognized the buyer’s premises as the place of removal under similar facts. The department had not appealed or challenged these decisions, nor had any higher forum set them aside. The Tribunal emphasized that the burden of disproving the contractual terms lay with the department, which had failed to do so.
Regarding courier services, the Tribunal held that such services are directly linked to the manufacture and removal of goods and qualify as input services under Rule 2(l) of the CENVAT Credit Rules, 2004. The denial of credit on this ground was therefore unsustainable.
The Tribunal concluded that judicial discipline required adherence to its own Larger Bench decision and the consistent interpretation of the place of removal under FOR contracts. The impugned order was based on an incomplete and rigid application of Ultra Tech, ignoring the nuanced factual matrix established by the appellant’s documentation.
The Verdict
The appeal is allowed. The impugned order dated 14.08.2017 is set aside. The matter is remanded to the adjudicating authority to verify the appellant’s agreements, invoices, and transport documents to ascertain whether the buyer’s premises constitutes the place of removal under the FOR contracts. If confirmed, the appellant is entitled to CENVAT credit for GTA services, insurance services, and courier services amounting to Rs. 8,27,006. The penalty of Rs. 82,701 is cancelled. The adjudicating authority shall complete verification and pass a fresh order within 12 weeks from the date of this order.
What This Means For Similar Cases
Place of Removal Is Fact-Specific, Not Presumptive
- Practitioners must now meticulously document contractual terms (FOR, FOB, CIF) and invoice structures to establish the place of removal.
- Merely relying on Ultra Tech Cement Ltd. to deny credit is insufficient; the burden shifts to the department to disprove contractual evidence.
- Tax officers must apply the Emco-Roofit-Bharat Fritz Werner framework before denying credit on transportation services.
Documentation Is Critical for Credit Claims
- Invoices must clearly indicate delivery destination and include freight in assessable value.
- Agreements with transporters and buyers should explicitly state risk transfer point.
- Past favorable orders (even under different entity names) can be cited as binding precedent if not overruled.
Courier Services Are Eligible Input Services
- Credit on courier services for despatch of goods is now explicitly recognized as admissible if directly linked to manufacture and removal.
- This closes a long-standing ambiguity and aligns with the broad definition of input services under Rule 2(l).
