2014 (1) TMI 208 - AT - Service Tax

Admissibility of CENVAT Credit - Service Tax paid on CHA services - Goods sold on sold on FOB/CIF basis - Held that - for a manufacturer/consignor, the eligibility to avail credit of the service tax paid on the transportation during removal of excisable goods would depend upon the place of removal as per the definition. In case of a factory gate sale, sale from a non-duty paid warehouse, or from a duty paid depot (from where the excisable goods are sold, after their clearance from the factory), the determination of the place of removal does not pose much problem. However, there may be situations where the manufacturer/consignor may claim that the sale has taken place at the destination point because in terms of the sale contract/agreement (i) the ownership of goods and the property in the goods remained with the seller of the goods till the delivery of the goods in acceptable condition to the purchaser at his door step; (ii) the seller bore the risk of loss of or damage to the goods during transit to the destination; and (iii) the freight charges were an integral part of the price of goods. In such cases, the credit of the service tax paid on the transportation up to such place of sale would be admissible if it can be established by the claimant of such credit that the sale and the transfer of property in goods. The services rendered at port by CHAs are after clearance of the goods from the factory gate and hence cannot be treated as input services. From this it emerges that the place of removal in that case, was factory gate. There is no doubt that in each and every case, it is necessary to consider as to exactly which is the place of removal before allowing the benefit of CENVAT credit. Therefore any decision rendered in an individual case cannot be applied to another case unless the facts happen to be same - Decided against Revenue.

Summary

Issues:
1. Credit of services availed by the respondent from the factory to the port of export.
2. Determination of the place of removal in cases of exports under FOB / CIF contracts.
3. Eligibility of availing credit of service tax paid on transportation during removal of excisable goods.
4. Interpretation of the definition of input services in relation to outward transportation up to the place of removal.
5. Conflict between different decisions on the determination of the place of removal.

Issue 1: Credit of services availed by the respondent from the factory to the port of export.

The appeal was directed by the Revenue against the Order-in-Appeal (OIA) passed by the Commissioner (Appeals), Vapi, allowing the credit of services availed by the respondent from the factory to the port of export. The Commissioner (Appeals) relied on judgments of CESTAT, Ahd., in similar cases. The Revenue argued that the credit was incorrectly allowed, while the respondent cited case laws and a CBEC Circular to support their position.

Issue 2: Determination of the place of removal in cases of exports under FOB / CIF contracts.

The Tribunal examined the concept of 'place of removal' in cases of goods sold on FOB / CIF basis. Referring to a specific judgment, it was held that the place of removal in such cases is part of the shipment, and services availed till the place of removal are admissible. The Circular issued by the CBEC was considered relevant in determining the place of removal, especially in cases of factory gate sale or sale from a non-duty paid warehouse.

Issue 3: Eligibility of availing credit of service tax paid on transportation during removal of excisable goods.

The Tribunal emphasized that for a manufacturer/consignor, the eligibility to avail credit of service tax paid on transportation during the removal of excisable goods depends on the place of removal as defined under the Central Excise Act, 1944. It was clarified that in cases of sale on FOB/CIF basis, the place of removal has to be the load port only, making services rendered for outward transportation up to the place of removal eligible for CENVAT credit.

Issue 4: Interpretation of the definition of input services in relation to outward transportation up to the place of removal.

The definition of input services includes any service used for outward transportation up to the place of removal, facilitating goods to reach the place of removal. The Tribunal highlighted that services rendered by CHAs at the port after clearance of goods from the factory gate are considered input services, as they facilitate the clearance of final products from the place of removal, i.e., the load port.

Issue 5: Conflict between different decisions on the determination of the place of removal.

The Tribunal addressed a conflict between two decisions, emphasizing the need to consider the specific facts of each case to determine the place of removal accurately before allowing the benefit of CENVAT credit. It was concluded that decisions in individual cases cannot be applied universally, and the Tribunal's decision in the current case was found applicable based on the facts presented, leading to the rejection of the Revenue's appeal.

This detailed analysis of the judgment provides insights into the issues surrounding the credit of services availed, determination of the place of removal in export contracts, eligibility of availing credit of service tax, interpretation of input services, and the resolution of conflicts between different decisions.