Cenvat Credit on Outward Transport
This query is : Resolved
18 September 2009
You can take cenvat credit of freight outward only upto the place of removal.
if u send finish goods to your warehouse as stock trfd. than u can take credit only freight outward from your factory to warehouse
if u send finish goods directly to party,than u can not take cenvat credit of freight outward
if u send finish goods to your warehouse as stock trfd. than u can take credit only freight outward from your factory to warehouse
if u send finish goods directly to party,than u can not take cenvat credit of freight outward
19 September 2009
Thank you Jiwan
But I heard that in Bangalore Tribunal vs ABB Ltd case , they had given the judgement that Outward Freight from the place of removal is also eligible for Cenvat Credit
Can you clarify?
But I heard that in Bangalore Tribunal vs ABB Ltd case , they had given the judgement that Outward Freight from the place of removal is also eligible for Cenvat Credit
Can you clarify?
03 October 2009
You are right in my opinion the credit on outward freight is available for credit as confirmed in the ABB case
19 July 2024
The case you mentioned involving Bangalore Tribunal vs ABB Ltd does indeed pertain to the eligibility of CENVAT credit on outward freight from the place of removal. Here’s a clarification based on the case and relevant principles:
### Case Background:
In the case of **ABB Ltd vs Commissioner of Central Excise, Bangalore**, the issue revolved around whether CENVAT credit could be availed on the outward freight from the factory premises (place of removal) to the buyer's premises. ABB Ltd contended that such freight charges were integral to the sale of goods and should be eligible for CENVAT credit under Rule 9 of the CENVAT Credit Rules, 2004.
### Tribunal's Decision:
The Bangalore Tribunal ruled in favor of ABB Ltd, stating that the outward freight from the place of removal (factory) to the buyer's premises is indeed eligible for CENVAT credit. The key reasoning provided by the Tribunal was that the freight charges form part of the sale price of the goods and are directly related to the delivery of goods to the buyer. Therefore, these charges are integral to the manufacturing process and qualify as input services under Rule 2(l) of the CENVAT Credit Rules, 2004.
### Legal Interpretation:
1. **Rule 2(l) of CENVAT Credit Rules**: This rule defines "input service" to include services used in relation to the manufacture of final products, including outward transportation up to the place of removal.
2. **Place of Removal**: The concept of "place of removal" is crucial in excise and CENVAT law, as it determines the point at which the excise duty becomes payable and also the point from which transportation can be considered integral to the manufacturing process.
3. **Integral to Manufacturing Process**: For any service or input to be eligible for CENVAT credit, it must be directly or indirectly used in or in relation to the manufacture of final products. In the ABB Ltd case, the Tribunal found that outward freight from the factory (place of removal) to the buyer's premises satisfies this criterion as it is essential for delivering the goods to the customer.
### Conclusion:
Based on the Bangalore Tribunal's decision in the ABB Ltd case, outward freight from the place of removal is eligible for CENVAT credit under certain conditions, primarily when it is integral to the sale of goods and part of the delivery process to the buyer. This decision provides clarity on the scope of CENVAT credit for transportation services in the context of manufacturing and sale of goods.
It's important to note that specific circumstances and factual details can impact the eligibility of CENVAT credit, and businesses should consult with tax experts or legal advisors to ensure compliance with current regulations and judicial interpretations.
### Case Background:
In the case of **ABB Ltd vs Commissioner of Central Excise, Bangalore**, the issue revolved around whether CENVAT credit could be availed on the outward freight from the factory premises (place of removal) to the buyer's premises. ABB Ltd contended that such freight charges were integral to the sale of goods and should be eligible for CENVAT credit under Rule 9 of the CENVAT Credit Rules, 2004.
### Tribunal's Decision:
The Bangalore Tribunal ruled in favor of ABB Ltd, stating that the outward freight from the place of removal (factory) to the buyer's premises is indeed eligible for CENVAT credit. The key reasoning provided by the Tribunal was that the freight charges form part of the sale price of the goods and are directly related to the delivery of goods to the buyer. Therefore, these charges are integral to the manufacturing process and qualify as input services under Rule 2(l) of the CENVAT Credit Rules, 2004.
### Legal Interpretation:
1. **Rule 2(l) of CENVAT Credit Rules**: This rule defines "input service" to include services used in relation to the manufacture of final products, including outward transportation up to the place of removal.
2. **Place of Removal**: The concept of "place of removal" is crucial in excise and CENVAT law, as it determines the point at which the excise duty becomes payable and also the point from which transportation can be considered integral to the manufacturing process.
3. **Integral to Manufacturing Process**: For any service or input to be eligible for CENVAT credit, it must be directly or indirectly used in or in relation to the manufacture of final products. In the ABB Ltd case, the Tribunal found that outward freight from the factory (place of removal) to the buyer's premises satisfies this criterion as it is essential for delivering the goods to the customer.
### Conclusion:
Based on the Bangalore Tribunal's decision in the ABB Ltd case, outward freight from the place of removal is eligible for CENVAT credit under certain conditions, primarily when it is integral to the sale of goods and part of the delivery process to the buyer. This decision provides clarity on the scope of CENVAT credit for transportation services in the context of manufacturing and sale of goods.
It's important to note that specific circumstances and factual details can impact the eligibility of CENVAT credit, and businesses should consult with tax experts or legal advisors to ensure compliance with current regulations and judicial interpretations.
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