2011 (7) TMI 547 - AT - Service Tax

Cenvat credit - Export of goods on FOB basis - denied cenvat credit of service tax paid on shipping freight charges, port charges, bank charges, courier charges, CHA services etc. relating to exports from India - Held that - The expenditure incurred are on services related to business activities and upto the place of removal only. Therefore, in terms of the Board s instructions, definition of input service and decision of Coca Cola India Pvt. Limited vs. CCE, Pune 2009 (8) TMI 50 - BOMBAY HIGH COURT and ABB Limited 2011 (3) TMI 248 - KARNATAKA HIGH COURT the services on which service tax was paid and received by the appellant have to be held as input services. Thus input service is covered by the definition, appellants are eligible for the cenvat credit - Decided in favour of assessee.

Summary

Issues: Denial of cenvat credit on service tax paid on various charges related to exports.

In this judgment by the Appellate Tribunal CESTAT, AHEMDABAD, the issue at hand involved the denial of cenvat credit to the appellants for service tax paid on shipping freight charges, port charges, bank charges, courier charges, and CHA services related to their exports from India. The denial was based on the argument that these activities were post clearance and lacked a clear nexus with the manufacturing and export of excisable goods. The advocate for the appellants argued that various High Court decisions supported the appellants' position, emphasizing that the services need to be related to business activities without the necessity of proving a direct nexus with manufacturing. Citing decisions from the High Courts of Mumbai and Karnataka, as well as a previous ruling by the Tribunal, the advocate contended that services up to the place of removal should be considered input services for cenvat credit eligibility. The Tribunal, considering the precedent decisions and the definition of input service, held that the services on which service tax was paid and received by the appellant should indeed be classified as input services. Consequently, the impugned order denying the credit was set aside, and the appeal was allowed, granting consequential relief to the appellant.

This judgment highlights the importance of establishing a connection between services and business activities for cenvat credit eligibility, as opposed to a direct nexus with manufacturing. It also underscores the significance of precedent decisions from High Courts and Tribunals in determining the applicability of cenvat credit in cases involving service tax on charges related to exports. The decision provides clarity on the interpretation of input services in the context of service tax paid on various activities linked to export operations, ultimately ensuring a fair and consistent application of tax laws in similar cases.