Determination of place of removal - CBEC Clarification

In DDT dated 21.10.2014, following suggestion/comment has been made:
“Can't they give a two-line clarification that transport charges are not to be included in the assessable value and that credit will be allowed on transportation charges? The whole concept of ‘place of removal' should be removed from the statute.”

On one hand DDT suggests that transport charges should not be included in assessable value, whereas on other hand it has been suggested that Cenvat credit should be allowed on transportation charges. How this is possible? The basic concept of Cenvat credit scheme is to avoid cascading effect of indirect taxes. If assessee is required to pay CE duty on the value inclusive of transport charges, he should be entitled to take Cenvat credit of service tax paid on such transport charges. If assessee is not required pay CE duty on transport charges, he should not be entitled to take Cenvat credit of ST paid on such transport charges, as there is no cascading effect of levy of CE duty on such ST suffered by assessee.

For the goods assessable on transaction value u/s 4, this concept is simple. However, for the goods assessable on tariff value u/s 3(2) or on MRP u/s 4A, it is not ascertainable whether the assessable value, i.e. tariff value or MRP less abatement, includes transportation charges from the factory to depot or any other ‘place of removal’.

There are some recent case law on this issue: Ultratech Cement Ltd. - 2014-TIOL-1437-HC-CHHATTISGARH-CX. Ultratech Cement Ltd. - 2014-TIOL-1934-CESTAT-DEL.

These are personal views.

S B Parikh 21/10/2014