2017 (9) TMI 411 - AT - Central Excise

CENVAT credit - freight - place of removal - whether CENVAT credit have been rightly disallowed on the inputs (freight output) service for transporting and forwarding of the goods beyond their place of removal, for being exported out of India? - whether the place of removal is the factory gate of the appellant or the port of loading? - Held that - the SCN have been issued on the basic charge that the place of removal under the facts and circumstances is factory gate and not the port of export or the load port - I find the said allegation to be not sustainable in the facts and circumstances under the scheme of the Act and the Rules and also particularly in view of the ruling of Hon ble Gujarat High Court in the case of Dynamic Industries Ltd. 2014 (8) TMI 713 - GUJARAT HIGH COURT , where it was held that in the case of export, the place of removal is the port of loading. It is clear that the appellant is obligated to deliver the export goods upto the place of foreign buyer, therefore, in India, the place of removal is the port of export. Appeal allowed - decided in favor of appellant.

Summary

Issues:
- Disallowance of CENVAT credit on inputs freight output service for transporting and forwarding of goods beyond place of removal for export.
- Determination of place of removal: factory gate or port of loading.

Analysis:
1. Issue of CENVAT Credit Disallowance:
The appeals revolved around the disallowance of CENVAT credit on service tax paid for transportation and forwarding of goods beyond the place of removal for export. The Revenue contended that the appellant availed inadmissible credit in contravention of CENVAT Credit Rules, 2004. The appellant argued that they incurred freight charges up to the customer's doorstep for exports made on CIF basis, including insurance and freight charges subject to service tax. The show-cause notices proposed disallowing the credit and imposing penalties, which were confirmed during adjudication.

2. Determination of Place of Removal:
The crucial issue was whether the place of removal for the goods being exported was the factory gate or the port of loading. The Revenue considered the factory gate as the place of removal, disallowing credit on transport expenses incurred by the appellant from the factory gate to the port. The appellant, supported by export documents, argued that the place of removal for exports is the port of loading, citing judgments including Commissioner Vs. Dynamic Industries Ltd. The Tribunal found the show-cause notice misconceived, ruling that under the Act and Rules, the port of export should be considered the place of removal. Referring to a previous case involving the appellant, the Tribunal held in favor of the appellant, allowing the appeals and granting consequential benefits.

In conclusion, the Tribunal set aside the impugned orders, emphasizing that the place of removal for export goods is the port of export, not the factory gate. The judgment highlighted the importance of export documentation and previous rulings to determine the eligibility of CENVAT credit on transport expenses for goods exported out of India.