2020 (12) TMI 846 - AT - Central Excise

CENVAT Credit - place of removal - input services relating to export of goods to Nepal upto and at the port, airport and land border Customs station by the appellant - requirement of Rule 2(l)(ii) of the Cenvat Credit Rules satisfied or not - HELD THAT - In the instant case the documents on record evidences that the subject goods were exported under bond by the appellant on FOB basis. Further, all the said services were and had to be rendered and/or availed at or prior to the port of shipment premises. None of these services were or can be rendered after the said goods are removed from the port. They have to be rendered before the vessels containing the subject goods left the port, from where the removal of the said goods took place. In case of export consignments ownership transfer takes place through Bill of Lading and hence the exporter continues to be owner and holds the title to the goods till the respective export consignment is handed over to master of the vessel and goods are loaded on board the vessel and that all services rendered prior thereto were services upto the place of removal within the meaning of Rule 2(l)(ii) of the Cenvat Credit Rules. In the case of COMMISSIONER VERSUS DYNAMIC INDUSTRIES LTD. 2014 (8) TMI 713 - GUJARAT HIGH COURT , the Hon ble Gujarat High Court has held that where exports are on FOB basis, place of removal is the port and not factory gate and hence since the impugned CHA, shipping agent and container services were utilised for purposes of export of final products and exporters could not do business without them, the service tax paid on these services availed was admissible. It has been further held that the words input services cannot be given restrictive meaning in view of the phrase means and includes used in Rule 2(l) of the Cenvat Credit Rules. The appellant has correctly availed of credit of the subject input services - Appeal allowed - decided in favor of appellant.

Summary

Issues Involved:
1. Whether the said services were rendered "upto the place of removal" within the meaning of Rule 2(l) of the Cenvat Credit Rules and thus qualified to be "input services" eligible for Cenvat credit.
2. Whether the said services satisfied the requirement of Rule 2(l)(ii) of the Cenvat Credit Rules of being directly or indirectly used in or in relation to the manufacture of final products and clearance of the said final products from/upto the place of removal.
3. Whether the demand for Cenvat credit disallowance is barred by limitation.

Detailed Analysis:

Issue I: Place of Removal and Eligibility for Input Services
The appellant argued that for export goods, the place of removal extends to where export documents are presented to the Customs Office, i.e., the port, airport, or land customs station. This interpretation was supported by multiple judicial precedents and a CBEC Circular. The Tribunal agreed, noting that services rendered at or prior to the port of shipment are considered "upto the place of removal" as per Rule 2(l)(ii) of the Cenvat Credit Rules. The Tribunal cited the case of Electrosteel Casting Ltd. and the Gujarat High Court's decision in Inductotherm India Pvt. Ltd., which established that in export scenarios, the place of removal is the port of shipment, making services like cargo handling eligible for Cenvat credit.

Issue II: Services Used in Relation to Manufacture and Clearance
The appellant contended that the services in question were integrally connected with the business of manufacturing and clearing excisable goods for export. The Tribunal found that these services are indeed used in relation to the business of manufacturing and clearance of final products, thus qualifying as "input services" under Rule 2(l). The Tribunal referenced the Gujarat High Court's decision in Dynamic Industries Ltd., which held that services like CHA, shipping agent, and container services are essential for export and thus qualify as input services. The Tribunal also noted that the inclusive part of Rule 2(l) covers activities related to business, further supporting the appellant's claim.

Issue III: Limitation Period for Demand
The appellant argued that the demand was barred by limitation, as the show cause notice was issued beyond the prescribed one-year period. The Tribunal agreed, noting that the appellant had exported goods under the supervision of Central Excise officers and maintained all necessary records. There was no concealment or misstatement of facts, and the Department was fully aware of the services rendered. The Tribunal held that the extended period of limitation under the Proviso to Section 11A(1) of the Act was inapplicable, as the Department failed to establish any willful suppression or intent to evade duty.

Conclusion:
The Tribunal concluded that the appellant was entitled to Cenvat credit for the services in question, as they were rendered upto the place of removal and were integrally connected with the business of manufacturing and clearing excisable goods for export. The Tribunal also found that the demand was barred by limitation. Consequently, the impugned order was set aside, and the appeal was allowed.