2019 (6) TMI 15 - AT - Service Tax

CENVAT Credit - input services - GTA services - denial on the ground that Iron ore produced / manufactured is classifiable under CHH 26.01 of the CETA, 1985 and is exempt from duty of excise under Notification No.4/2006-CE dt. 01/03/2006 and hence not eligible for credit on input service - credit was denied also on the ground that the appellant cleared Iron ore from the factory to the port of shipment for export and therefore, in terms of Section 4(3)(c) of Central Excise Act, 1944, the place of removal of goods is the factory and the GTA service towards outward transportation is not eligible for credit as input service - scope of SCN. HELD THAT - It is undisputed fact that the appellant produced and exported iron ore which is classifiable under Chapter 2601 of CETA 1985 and hence excisable but attracts nil rate of duty under Notification No.4/2006 dt. 01/03/2006 - Further the finding of the Commissioner that the appellants are not manufacturers is not sustainable in law as held by various decisions of the court holding this activity as amounts to manufacture. Further, this finding that the processes undertaken by the appellant do not amount to manufacture is contrary to the grounds made in the show-cause notice and is beyond the scope of show-cause notice. Also, the Department has not challenged the finding of the Commissioner(Appeals) holding that the appellant is eligible for CENVAT credit. In the absence of challenge by the Department, the eligibility of the appellant for CENVAT credit has attained finality. This issue has also been settled by various decisions wherein it has been consistently held that in the case of export, place of removal is the port from where the goods are exported and hence up to the place of port, credit is available - credit allowed - appeal allowed - decided in favor of appellant.

Summary

Issues:
Appeal against disallowance of CENVAT credit on service tax paid on GTA service for transportation of goods; Classification of Iron ore under CHH 2601 as exempt from excise duty; Eligibility of CENVAT credit on input services for export; Place of removal in case of export for availing credit.

Analysis:
The appeal challenged the disallowance of CENVAT credit on service tax paid for the transportation of Iron ore by a GTA. The Commissioner disallowed the credit citing that Iron ore is exempt under Notification No.4/2006-CE and the place of removal for export goods is the factory, not the port, making the GTA service ineligible for credit. The appellant argued that the processes amount to manufacture, making them eligible for credit, relying on judicial precedents like Repro India Limited Vs. UOI. The appellant also claimed credit for services availed during specific periods and sought a refund under Rule 5, which was initially rejected but later partially allowed by the Commissioner(Appeals).

The Tribunal found that the Iron ore exported by the appellant falls under Chapter 2601 of CETA 1985, attracting nil excise duty. The Commissioner's finding that the appellant is not a manufacturer was deemed unsustainable, as various court decisions supported the activity as manufacturing. The eligibility of input and input services for goods exempt from duty for export was established by the Bombay High Court's judgment in Repro India Ltd. The Tribunal also noted that the eligibility of the appellant for CENVAT credit had attained finality as the Department did not challenge the Commissioner(Appeals) finding.

Regarding the place of removal for export goods, the Tribunal disagreed with the Commissioner(Appeals) and held that in the case of export, the port of export is considered the place of removal. This position was supported by various court decisions, indicating that credit is available for transportation services up to the port. Consequently, the Tribunal set aside the impugned order, allowing the appeal with any consequential relief deemed necessary.

This detailed analysis covers the issues involved in the legal judgment, highlighting the arguments presented by both parties and the Tribunal's reasoning for allowing the appeal against the disallowance of CENVAT credit on GTA service for transportation of Iron ore.