2011 (4) TMI 835 - AT - Central Excise

Cenvat credit - Outward transportation service - Held that - Para 8.2 of the Board s circular No. 91/8/2007-S.T. dt. 23-8-2007 laying down that where sale takes place at the destination point and the ownership of the goods remain with the seller till the delivery of the goods, the place of removal would get extended to the destination point and the credit of the service tax paid on the transportation up to such place of sale would be admissible - The place of removal is the load port and the department is not contesting the fact that in the instant case the export was carried out on FOB basis - Accordingly, the credit of service tax paid on outward transportation of export goods up to port of export which is the actual place of removal in the case of export is admissible - the assessees are eligible for the credit on the input service on outward transportation up to the place of removal - The appeal filed by the Revenue is not sustainable and fails.

Summary

Issues:
1. Admissibility of cenvat credit on service tax paid for outward transportation of exported goods.

Analysis:
The case involved M/s. Kanoria Chemicals and Industries Ltd. availing cenvat credit on duty paid on inputs, capital goods, and service tax paid on input services, specifically on outward transportation for exported excisable goods from January 2005 to July 2007. The Revenue disputed the credit availed, leading to a show cause notice and confirmation of demand by the original adjudicating authority. However, the Commissioner (Appeals) allowed the appeals filed by the assessee, relying on the case law of the Larger Bench of CESTAT in ABB Ltd. Vs. CCE Bangalore.

On appeal by the Revenue, it was argued that the Commissioner (Appeals) decision was erroneous as it was solely based on the Larger Bench's decision without valid reasons. The main contention of the Revenue was that transportation of finished goods post-manufacture cannot be considered as an input service, citing judgments of the Supreme Court and previous CESTAT decisions. The core issue was whether cenvat credit on service tax paid for outward transportation of exported goods was admissible.

The Tribunal considered the place of removal in export cases, citing previous judgments and the Board's circular. It was established that in cases of export, the place of removal extends to the load port, and the ownership of goods remains with the seller until export. The Tribunal concluded that in the instant case, where export was carried out on a Free on Board (FOB) basis, the credit of service tax paid on outward transportation up to the port of export, the actual place of removal, was admissible.

Further, the Tribunal referenced a judgment of the High Court of Karnataka, emphasizing the interpretation of clauses regarding input services and transportation up to the place of removal. The judgment highlighted the importance of harmonizing provisions and concluded that transportation charges up to the place of removal were included in the definition of input services.

Based on the legal position and facts presented, the Tribunal found that the assessees were eligible for the credit on input service for outward transportation up to the place of removal. Consequently, the Revenue's appeal was rejected, leading to the dismissal of related issues such as limitation, penalty imposition, and interest recovery.