Manufacturers can take Cenvat credit of Service Tax paid on outward freight upto the place of removal
Cenvat Credit can be taken on Input Services used in relation to the manufacturer of final products. The definition of Input Services as per CCR, 2004 are as follws:-
Rule 2(l) of Cenvat Credit Rules 2004, “Input service” means any service, -
(i) used by a provider of taxable 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,
and includes services used in relation to modernisation, renovation or repairs of a factory, premises of provider of output service or an office relating to such factory or premises, advertisement or sales promotion, market research, storage upto the place of removal, procurement of inputs, accounting, auditing, financing, recruitment and quality control, coaching and training, computer networking, credit rating, share registry, security, business exhibition, legal services, inward transportation of inputs or capital goods and outward transportation upto the place of removal;
The CBEC in Circular No. 97/8/07 dated August 23, 2007, clarified that for a manufacturer/consignor, the eligibility to get credit of the service tax paid on transportation during removal of excisable goods would depend on the place of removal as per the definition.
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
In conclusion, a manufacturer/consignor can take credit on the service tax paid on outward transport of goods up to the place of removal.
---------- CA Rahul Singhal