2011 (8) TMI 253 - AT - Service Tax

Reversal of cenvat credit - outward transportation - Refund - In this case the respondent has taken cenvat credit paid on outward freight up to Port of export involved in the goods exported by the respondents - High Court of Karnataka in the case of ABB Limited (2011 -TMI - 203985 - KARNATAKA HIGH COURT) and the Hon ble High Court of Karnataka has taken a view that up to the date of amendment of definition of input service by which the words from place of removal were substituted in place of Up to place of removal credit of service tax on Goods Transport Agency services would be available up to the place of removal and what is required to be seen is that whether it is related to business activities or not and nexus with the manufacture is not required - Decided in favor of the assessee

Summary

Issues:
1. Eligibility of cenvat credit for service tax paid on outward transportation of goods for export.
2. Determination of place of removal for cenvat credit purposes.
3. Nexus requirement between input service and manufacture for cenvat credit eligibility.

Analysis:

Issue 1: Eligibility of Cenvat Credit
The respondents availed cenvat credit for service tax paid on outward transportation of goods for export. Upon objection by the Revenue, they reversed the credit but later filed a refund claim, asserting their eligibility for the credit. The original adjudicating authority rejected the claim, but the appeal filed by the respondents was allowed, granting them the refund. The Revenue subsequently appealed this decision.

Issue 2: Determination of Place of Removal
The Commissioner, in analyzing the case, considered previous Tribunal decisions like Adani Pharmachem Pvt. Limited, Rolex Spring, and Ambuja Cement Limited. These decisions led to the conclusion that, for exports, the Port of export should be deemed as the place of removal, contrary to the factory as determined by the lower authority. The Revenue's appeal contended that the input service must be directly or indirectly related to the final products or input service, citing the Gujarat Ambuja Cements Limited case. They argued that the transport service credit should only extend up to the place of removal, which they asserted to be the factory gate.

Issue 3: Nexus Requirement for Cenvat Credit
The High Court of Karnataka, in the case of ABB Limited, clarified that until the amendment of the definition of input service, credit for service tax on Goods Transport Agency services should be available up to the place of removal. The court emphasized that the service's relation to business activities, rather than a direct nexus with manufacture, was crucial. Considering this and the precedent that Port of export is the place of removal for exports, the respondents' eligibility for the refund was upheld in the impugned order.

In conclusion, the Tribunal found no merit in the Revenue's appeal, rejecting it and affirming the respondents' eligibility for the cenvat credit refund.