2010 (11) TMI 638 - AT - Service Tax

Denial of input service credit - Rule 2(l) of the Cenvat Credit Rules, 2004 - post arrival of the goods at the port of destination. - Held and decided that assessee is entitled for input service credit on CHA service - Keeping in view the case of Maruti Suzuki Ltd. 2009 (8) TMI 14 - SUPREME COURT - interpreting the scope of input service ,in the light of the judgment of the Apex Court in the case of Maruti Suzuki Ltd. (supra), we hold that the services having nexus or integral connection with the manufacture of final products as well as the business of manufacture of final product would qualify to be input service under Rule 2(l) of 2004 Rules - appellants are entitled to avail input service credit on CHA service availed by them for export of goods - Appeal allowed.

Summary

Issues:
Denial of input service credit for Custom House Agent (CHA) service under Rule 2(l) of the Cenvat Credit Rules, 2004.

Analysis:
The appellant was denied input service credit for the service of a Custom House Agent (CHA) for the shipment of goods exported by them, as it was held that the service did not qualify as per Rule 2(l) of the Cenvat Credit Rules, 2004. The Commissioner (Appeals) reasoned that CHA charges are incurred post-arrival at the destination port and cannot be considered as 'input service' under the rules. The appellant argued citing precedents like Mundra Port & Special Economic Zone Ltd. v. C.C.E. and CCE v. Ultratech Cement Ltd., asserting their entitlement to the credit based on these decisions.

The Departmental Representative (DR) referred to cases like Excel Crop Care Ltd. v. CCE and Kbace Tech (P.) Ltd. v. CCE&ST, emphasizing that CHA services for exports lack nexus with manufacturing activities and should not be considered as input services. The DR also relied on judgments like CCE v. Sundaram Brake Linings and Maruti Suzuki Ltd. v. CCE to support the argument that services availed must have a direct nexus with manufacturing activities to qualify as input services.

Upon examination, the Tribunal noted the conflicting decisions in previous cases but ultimately relied on the decision in Mundra Port & Special Economic Zone Ltd., which allowed input service credit on CHA services. Referring to the judgment in CCE v. Rolex Rings (P.) Ltd., the Tribunal held that in cases of export, the port of export is considered the place of removal of goods, entitling the appellant to claim input service credit for CHA services related to export activities.

In conclusion, the impugned order denying input service credit for CHA services was set aside, and the appeal was allowed in favor of the appellant, based on the interpretation that services with a nexus to the business of manufacturing final products qualify as input services under Rule 2(l) of the Cenvat Credit Rules, 2004.