The Hyderabad Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has held that Service Tax paid on Goods Transport Agency (GTA) services used for outward transportation up to the buyer’s premises is admissible as CENVAT Credit where the goods are sold on FOR destination basis and the ownership and transit risk remain with the seller till delivery.
The bench of Angad Prasad (Judicial Member) and A.K. Jyotishi (Technical Member) has observed that once the Department accepted the transaction value inclusive of freight and insurance for valuation purposes and collected duty on such value, it could not simultaneously adopt a contrary stand for denying CENVAT Credit. The Bench observed that such an approach would amount to taking inconsistent positions for valuation and credit purposes.
The dispute before the Tribunal centered on whether the buyer’s premises or depot could be treated as the “place of removal” under Section 4 of the Central Excise Act, 1944, thereby making outward transportation an “input service” under Rule 2(l) of the CENVAT Credit Rules, 2004.
The respondent company, engaged in the manufacture of industrial cables falling under Chapter 85 of the Central Excise Tariff, had cleared goods both on ex-factory basis and FOR destination basis, including depot clearances. The company included freight and insurance charges in the assessable value for FOR sales and paid Central Excise Duty on such value. It also paid Service Tax under reverse charge on GTA services and availed CENVAT Credit on the same.
The Department denied the credit on the ground that the factory gate constituted the “place of removal” and that transportation beyond the factory gate could not qualify as input service after the amendment to Rule 2(l) of the CENVAT Credit Rules. The Revenue relied heavily on the Supreme Court judgment in CCE vs Ultra Tech Cement Ltd. to argue that outward freight beyond the factory gate was not eligible for credit.
However, the assessee contended that the facts of the present case were materially different. It argued that the sales were on FOR destination basis, freight and insurance formed part of the assessable value, transit risk remained with the company till delivery, and ownership passed only upon delivery at the buyer’s premises. The company further pointed out that the Department had accepted the assessable value inclusive of freight and had never sought reassessment.
After examining the contractual terms and factual matrix, the Tribunal observed that the determination of “place of removal” is essentially a question of fact dependent upon the terms of sale, transfer of title, freight, insurance, transit risk, and the point at which sale is completed.
The Bench noted that in the present case, goods were supplied on FOR destination basis, freight and insurance were borne by the respondent, duty was discharged on the value inclusive of freight, and the transit risk remained with the respondent till delivery at the buyer’s premises. The Tribunal recorded that these findings were not effectively rebutted by the Department.
The Tribunal further observed that if the Department genuinely believed that the factory gate alone constituted the place of removal, it ought to have reassessed the assessable value and excluded freight charges from the transaction value. Having accepted duty on the enhanced value, denial of credit on the corresponding GTA service was held to be legally unsustainable.
Distinguishing the Supreme Court ruling in Ultra Tech Cement Ltd., the Tribunal clarified that the Apex Court had not laid down an absolute proposition that the factory gate must invariably be treated as the place of removal irrespective of contractual terms. The Bench held that where FOR destination sales, retention of ownership risk till delivery, and inclusion of freight in assessable value are established, the buyer’s premises can validly constitute the place of removal.
The Tribunal also relied upon CBIC Circular No. 1065/4/2018-CX dated 08.06.2018, which clarifies that the eligibility of credit on outward freight depends upon the facts of each case and the determination of the place of removal.
In support of its conclusions, the Bench referred to several judicial precedents including Inox Air Products Pvt. Ltd., Bharat Frit Werner Ltd., Hindustan Zinc Ltd., and Sanghi Industries Ltd., where credit on outward GTA services was allowed in cases involving FOR destination sales and delivery at buyers’ premises.
The Tribunal additionally observed that depots are specifically covered within the statutory definition of “place of removal” under Section 4 of the Central Excise Act. Consequently, transportation up to depots where goods are stored and subsequently sold would also qualify for credit.
Relying upon earlier decisions in Schneider Electric India Pvt. Ltd. and Pawan Power and Telecom Ltd., the Bench reiterated that the actual place of sale must be determined from the factual matrix and contractual terms rather than by mechanically treating the factory gate as the place of removal in every case.
Ultimately, the Tribunal held that where goods are sold on FOR destination basis, freight and insurance are included in the assessable value, Central Excise Duty is paid on such value, and ownership and transit risk remain with the seller till delivery, the buyer’s premises would constitute the “place of removal” for purposes of Rule 2(l) of the CENVAT Credit Rules, 2004. Consequently, Service Tax paid on outward GTA services up to such place would be admissible as CENVAT Credit.
Accordingly, the Hyderabad Bench dismissed the Revenue’s appeal and upheld the order of the Commissioner (Appeals) granting credit to the assessee.
Case Details
Case Title: Commissioner of Central Tax Versus M/s Gloster Cables Ltd.
Citation: JURISHOUR-1171-CES-2026(HYD)
Case No.: Excise Appeal No. 30453 of 2019
Date: 07.05.2026
Counsel For Appellant: B. Sangameshwar Rao, Authorized Representative
Counsel For Respondent: P. Rosi Reddy, Advocate
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