2008 (7) TMI 102 - AT - Service Tax

Eligibility to avail credit of service tax paid on CHA services rendered in the port to the exporter when the export has been made on FOB basis or CIF basis in case of export on CIF/FOB basis, place of removal is load port - hence service tax paid on CHA services is admissible as credit in view of the fact that the place of removal has to be considered as the port where the goods are put on board the ship or the aircraft as the case may be revenue s appeal are without merit, hence rejected

Summary

Issues:
Eligibility of service tax paid on CHA services for exporters on FOB or CIF basis.

Analysis:
In a series of appeals, the issue revolved around the eligibility of service tax paid on Customs House Agent (CHA) services for exporters when exporting goods on Free on Board (FOB) or Cost, Insurance, and Freight (CIF) basis. The Commissioner (Appeals) had ruled in favor of allowing CENVAT credit for service tax paid on CHA services, considering the port where goods are loaded onto the ship or aircraft as the place of removal. This decision was supported by a Tribunal judgment and a Circular issued by the Central Board of Excise and Customs (CBEC).

During the hearing, the Revenue cited a different Tribunal decision to argue against the admissibility of CENVAT credit for duty paid on CHA services, contending that activities at the load port are unrelated to the manufacturing process, which concludes at the factory gate for export goods. Conversely, the Respondent's Advocate relied on another Tribunal decision and the CBEC Circular, emphasizing that the place of removal depends on the passing of property or ownership of goods, particularly in FOB/CIF sales.

After considering both arguments, the Member analyzed the CBEC Circular's definition of "place of removal" under the CENVAT Credit Rules, highlighting that for manufacturers or consignors, the eligibility for service tax credit during goods transportation hinges on the place of removal. The Circular specified that in FOB/CIF sales, the place of removal is the load port, making service tax paid for outward transportation up to this point eligible for CENVAT credit. Additionally, the Circular clarified that services facilitating final product clearance from the place of removal, i.e., the load port, are considered input services.

The Member noted a conflict between the two Tribunal decisions cited, where one considered the place of removal as the factory gate and the other as the load port. However, the Member concluded that the Tribunal decision supporting the Respondent's position was more applicable to the current case, distinguishing it from the conflicting decision. Emphasizing the need to determine the specific place of removal in each case, the Member rejected the Revenue's appeals, ruling in favor of allowing CENVAT credit for service tax paid on CHA services in the context of FOB/CIF export sales.

In conclusion, the judgment clarified the eligibility of service tax paid on CHA services for exporters on FOB or CIF basis, emphasizing the importance of determining the place of removal for CENVAT credit purposes and reconciling conflicting Tribunal decisions through a case-specific analysis.