Ambuja Cements Challenges CENVAT Credit Denial: Legal Battle Ahead

Ambuja Cements Ltd has received an order disallowing its Cenvat credit claims along with a penalty imposition, prompting the company to file an appeal seeking relief. This development comes as part of ongoing scrutiny on the admissibility of Cenvat credit related to service tax paid on specific input services.

 

Key Highlights of the Order and Appeal

 

The disallowed Cenvat credit primarily relates to Goods Transport Agency (GTA) services used for outward transportation of cement on a Free on Road (FOR) destination basis.

 

The adjudicating authority determined that the credit availed on GTA services violated provisions under Rule 2(l) of the Cenvat Credit Rules, 2004, resulting in denial of credit and financial penalty.

 

Ambuja Cements maintains that since the sale of cement follows FOR destination terms, ownership transfers only at the customer’s premises, making the credit admissible under previous judicial decisions.

 

The company’s appeal emphasizes interpretations adopted by higher judicial bodies supporting credit availability on such transport services for goods sold on FOR basis.

 

This order forms part of a larger tax dispute environment impacting several players in the cement and manufacturing sectors regarding Cenvat credit usage and compliance.

 

What’s Next: Legal Battle and Market Impact

 

Ambuja Cements is proceeding with a formal appeal while seeking suspension of penalties and credit disallowance during the litigation period to safeguard cash flows.

 

The case underscores the complexities of indirect tax compliance under evolving regulatory norms, with potential implications for the wider industrial credit framework.

 

Investors and stakeholders will keenly watch developments, as the resolution could impact the company’s cost structures and operational efficiency.

 

The company remains committed to resolving the issue through legal channels while continuing its business strategies in India’s cement market.

 

Source: CaseLaw India, TaxScan India, Central Excise Tribunal Orders