2024 (3) TMI 494 - AT - Central Excise

Denial of CENVAT Credit - Input service or not - Inland Haulage Charges/Transport Charges - place of removal - HELD THAT - The activity of transportation of goods for export is an input service provided it is availed upto the place of removal and that the service tax paid for transportation of goods upto the place of removal entitles the eligibility of availing cenvat credit there upon - Place of removal has not been defined in Cenvat Credit Rules however Section 4 (3) (C) of Central Excise Act, 1944 defines place of removal . However, Rule 2(t) of Credit Rules allowed import of definition of the terms under Excise Act for interpretation of the terms employed in the Credit Rules. Though the exporter always need not to appoint the CHA or the clearing and forwarding agent and can fulfill all the formalities on his own but the another peculiar admitted fact of the present case is that the goods were agreed to be exported on FOB basis. FOB in shipping terms indicate who owns the goods during transit and who pays for the shipping associated fees and other freight charges. There is nothing on record to show that the appellant as manufacturer-exporter has incurred the expenditure till the time the goods are put on the vessel at the Gateway Port. As the appellant had also impressed upon the concept of the sale, it is observed that the said aspect has already been decided by the Hon ble Apex Court in the case of COMMISSIONER OF CUSTOMS AND CENTRAL EXCISE, NAGPUR VERSUS M/S ISPAT INDUSTRIES LTD. 2015 (10) TMI 613 - SUPREME COURT , the Hon ble Apex Court in the said case has held i nvoices were prepared only at the factory directly in the name of the customer in which the name of the Insurance Company as well as the number of the transit Insurance Policy were mentioned. Above all, excise invoices were prepared at the time of the goods leaving the factory in the name and address of the customers of the respondent. When the goods were handed over to the transporter, the respondent had no right to the disposal of the goods nor did it reserve such rights inasmuch as title had already passed to its customer. Though the appellant has relied upon the Board Circular of 2007 and 2014 but both the circulars are prior to impugned decision in Ispat Industries Ltd. case otherwise also both these circulars stands superseded by the other circular of 2015 as relied upon by the department and of 2018 as has been issued subsequent to the decision in Ispat Industries Ltd. The Inland haulage charges from ICD Garhi Harsaru to shipping port, Pepavav were the charges for the service received beyond the place of removal, hence, the appellant has rightly been disallowed the availment of cenvat credit thereupon. Finding no infirmity in the order under challenge, the same is hereby upheld. Appeal dismissed.

Summary

Issues Involved:
1. Eligibility of Cenvat Credit on Inland Haulage Charges.
2. Definition and interpretation of "Input Service" under Rule 2(l) of CCR, 2004.
3. Determination of "Place of Removal" for availing Cenvat Credit.
4. Applicability of extended period for issuing Show Cause Notice.
5. Revenue neutrality of the demand.

Summary:

1. Eligibility of Cenvat Credit on Inland Haulage Charges:
The appellant, engaged in the manufacture of Motor Cycle, Scooters, and parts, availed input service credit on service tax paid on Inland Haulage Charges for transporting export goods from Inland Container Freight Station (ICD) to the sea port of loading. The Department alleged ineligibility of this credit, proposing recovery of Rs. 1,79,61,711/- along with interest and penalties. The appellant contested this, arguing that the inland haulage charges are part of the input services as per Rule 2(l) of CCR, 2004.

2. Definition and Interpretation of "Input Service":
The appellant argued that the services fall within the definition of "Input Service" under Rule 2(l) of CCR, 2004, which includes services used in relation to the manufacture and clearance of final products up to the place of removal. The Tribunal referred to the Larger Bench decision in ABB Ltd. vs. CCE and the Supreme Court decision in System's Ltd. Vs. Union of India, emphasizing that the term "in relation to" is broad and inclusive.

3. Determination of "Place of Removal":
The appellant contended that the sea port of export is the place of removal, relying on various Circulars and Tribunal decisions. However, the Department argued that the place of removal is ICD Garhi Harsaru, where the Let Export order was issued. The Tribunal held that the place of removal is where the Let Export order is granted, which in this case is ICD Garhi Harsaru. The Tribunal referred to the Supreme Court's decision in Ispat Industries Ltd., which clarified that the place of removal is where the transfer of property in goods occurs.

4. Applicability of Extended Period for Issuing Show Cause Notice:
The appellant argued that there was no suppression of facts and that the extended period was wrongly invoked. The Tribunal did not find merit in this argument, stating that the appellant's own documents were used to make the case.

5. Revenue Neutrality of the Demand:
The appellant claimed that the demand was revenue neutral. However, the Tribunal upheld the Department's view that the inland haulage charges were incurred beyond the place of removal, making the appellant ineligible for Cenvat Credit on those charges.

Conclusion:
The Tribunal concluded that the Inland Haulage Charges from ICD Garhi Harsaru to the shipping port were for services received beyond the place of removal. Therefore, the appellant was rightly disallowed the availment of Cenvat Credit on these charges. The appeal was dismissed, and the order under challenge was upheld.

[Pronounced in the open Court on 07.03.2024]