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2018 (6) TMI 1296 - AT - Central ExciseCENVAT credit - input services used in or in relation to excisable goods meant for export - denial on the ground of nexus - place of removal - ISO Certification for the Unit - Held that - The term place of removal has been defined in Rule 2 (qa) of the CENVAT Credit Rules, 2004 in a manner similar to the definition in Section 4 of the Central Excise Act and neither includes the port of export - The CBEC had issued circular No. 999/6/15-CX dated 28.02.2015 holding that in case of clearance of goods for export by Manufacturer Exporter the transfer of property can be set to have taken place at the port with the shipping bill is filed by the Manufacturer Exporter and place of removal would be this Port/ICD/CFS. Needless to say, eligibility to CENVAT credit shall be determined accordingly - credit allowed. Services of ISO Certification - Held that - Certification is essential component of manufacturer ensuring quality of the product and the manufacturer reassuring their customer about it. Hence, it can be treated as, services incurred in or in relation to the manufacture of the final product - service tax paid on input services up to the point of export is allowable. Appeal allowed - decided in favor of appellant.
Issues:
- Disallowance of CENVAT credit for ISO Certification - Disallowance of CENVAT credit for input services used in or in relation to excisable goods meant for export Analysis: 1. The appeal involved a challenge against the Order-in-Appeal passed by the Commissioner (Appeals) denying the appellant CENVAT credit of ?1,43,382, which was originally allowed by the Original Authority. The appellant, a manufacturer of fertilizers, had taken credit of input services under Rule 3 of the CENVAT Credit Rules for payment of duty. The disallowance was based on the argument that the input services were not used directly or indirectly in or in relation to the manufacture of final products and clearance of final products up to the place of removal as required by Rule 2(l) of the CENVAT Credit Rules, 2004. 2. The Commissioner (Appeals) allowed the credit of various input services but disallowed credit pertaining to ISO Certification and input services used in or in relation to excisable goods meant for export. Regarding the ISO Certification, the Commissioner held that it did not relate even indirectly to the manufacturing activity, rejecting the appellant's contention that it was essential consultancy services related to quality control. As for the input services used in or in relation to excisable goods meant for export, the Commissioner relied on the judgment in Ispat Industries Limited, arguing that expenses incurred for transport after clearances from manufacturer premises cannot be included in the assessable value. 3. During the hearing, the appellant cited a previous judgment by the same Bench where service tax paid on certain services was allowed for credit. The Departmental Representative reiterated arguments from the Order-in-Appeal and cited a judgment by the Supreme Court in the case of Roofit Industries Limited, emphasizing the determination of the place of removal concerning the transfer of ownership in goods. 4. The presiding Member, after examining the records and arguments, found that the circular issued by CBEC clarified that in the case of clearance of goods for export by Manufacturer Exporter, the place of removal could be considered as the port. This circular, not considered by the Commissioner (Appeals), was deemed binding on the Department. Consequently, the disallowance of CENVAT credit for input services used in or in relation to excisable goods meant for export was set aside. Additionally, the Member opined that ISO Certification was an essential component related to the manufacture of the final product, aligning with the earlier decision of the Bench. Therefore, the appeal of the appellant was allowed, overturning the Order-in-Appeal.
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