2015 (5) TMI 982 - AT - Central Excise

Denial of CENVAT Credit - appellant had availed Cenvat credit of service tax paid on the freight charges for outward transportation of the goods cleared for export from the factory - Held that - Both the lower authorities have confirmed the demand of Cenvat credit on the GTA for period April 2008 Jun 2008 on the ground that prior to April, 2008 Cenvat Credit on outward transportation was available on the service used for clearances of the goods from the place of removal whereas after April 2008 due to amendment Cenvat credit on outward transportation is admissible only up to place of removal. In the present case, as per the lower authorities the place of removal is the factory gate and therefore credit could not allowed beyond the place of removal i.e. factory gate. The goods have been cleared for export from the place of removal. In case of export, ownership of the goods remains with exporter and therefore all the expenditure for the clearances of the goods up to port is borne by the exporters and in the present case also the export price is CIF therefore place of removal in case of export stand extended up to port. The transportation incurred for clearances of the goods from factory to the port is within the term of clearances of goods up to the place of removal therefore GTA is a service in the present case covered under the definition of input service even after amendment vide notification No. 10/2008-CE (N.T.). In this position, I am of the considered view that the Cenvat credit on the outward GTA is admissible. - Impugned order is set aside - Decided in favour of assessee.

Summary

Issues:
- Admissibility of Cenvat credit on service tax paid for outward transportation of goods cleared for export.
- Interpretation of place of removal for availing Cenvat credit.
- Applicability of Cenvat Credit Rules on transportation services post-amendment.

Analysis:
The judgment pertains to appeals against Orders-in-Appeal passed by the Commissioner of Central (Appeals), Pune-III, upholding the demand of Cenvat credit and rejecting the appellant's appeals. The appellant, a manufacturer of Pet Polyester Chips, availed Cenvat Credit facility for input/capital goods and input services used in manufacturing the final product. The issue arose when the department contended that availing Cenvat credit on service tax paid for the freight charges of outward transportation of goods cleared for export was inadmissible. A show cause notice was issued, leading to confirmation of the demand for Cenvat credit, along with penalties and interest. The appellant's appeals were subsequently rejected by the Commissioner (Appeals).

Upon review, it was noted that the lower authorities confirmed the demand of Cenvat credit on Goods Transport Agency (GTA) services for a specific period based on the interpretation of the place of removal. Pre-amendment, Cenvat credit on outward transportation was available until the place of removal, but post-amendment, it was limited to the factory gate as the place of removal. In the case of export, where ownership remains with the exporter until the goods reach the port, the expenses for transportation up to the port are borne by the exporter. Since the export price is Cost, Insurance, and Freight (CIF), the place of removal extends up to the port. Therefore, transportation from the factory to the port falls under the definition of "clearances of goods up to the place of removal," making GTA a service covered under the input service definition even after the amendment. Consequently, the Cenvat credit on outward GTA was deemed admissible, leading to the setting aside of the impugned orders and allowing the appeals with any consequential relief as per the law.

In conclusion, the judgment clarifies the admissibility of Cenvat credit on service tax paid for outward transportation of goods cleared for export, the interpretation of the place of removal for availing Cenvat credit, and the applicability of Cenvat Credit Rules on transportation services post-amendment. The decision provides a detailed analysis of the legal provisions and factual circumstances to arrive at the conclusion favoring the appellant regarding the admissibility of Cenvat credit on outward GTA services in the context of export transactions.