SERVICE TAX: PLACE OF REMOVAL FOR EXPORT PURPOSES

[Dr. Sanjiv Agarwal]

Meaning of Place of Removal [Rule 2 (qa)]

Cenvat credit of input services upto the ‘place of removal’ is allowed. The term ‘place of removal’ was earlier not defined in Cenvat Credit Rules 2004. However, the said term was defined in section 4(3)(c) of Central Excise Act 1944. The Hon’ble Delhi CESTAT in the case of M/s Ultratech Cement Ltd. Versus CCE, Raipur [2014 (3) TMI 159 - CESTAT NEW DELHI ] held that the definition of the term ‘place of removal’ as appearing under Central Excise Act cannot be applied under Cenvat Credit Rules, 2004.

The said term is now defined under rule 2(qa) of Cenvat Credit Rules, 2004 vide Notification No.21/2014 – CE (NT) dated 11.07.2014 which read as follows-

“Place of removal” w.e.f. 11.07.2014 means-

(i) a factory or any other place or premises of production tor manufacture of the excisable goods;

(ii) a warehouse or any other place or premises wherein the excisable goods have been permitted to be deposited without payment of duty;

(iii) a depot, premises of a consignment agent or any other place or premises from where the excisable goods are to be sold after their clearance from the factory, from where such goods are removed

The definition is similar to that in Central Excise Act, 1944. The definition of place of removal is used in the definition of input service as defined under rule 2(l) of the Cenvat Credit Rules, 2004 and is effective from 11.07.2014.

Judicial Pronouncements on Exports

In case of exports, the place of removal is port of export and not at the factory gate of the assessee.

In Stovec Industries Ltd v. CCE, Ahmedabad 2011 (3) TMI 1099 - CESTAT, AHEMDABAD, where assessee took Cenvat credit in respect of service tax paid on customs house agent service availed at port for export of their goods, the same was denied by the Department on the ground that said services were post-removal activity, in view of the judgment in case of CCE ,Rajkot v. Adani Pharmachem P Ltd [2008 (7) TMI 102 - CESTAT AHMEDABAD]  and Circular dated 23-8-2007 clarifying about ‘place of removal’, it was held that assessee was eligible to take Cenvat credit on the same.[Case Maintained in CCE and C v. Stovec Industries Ltd 2013 (1) TMI 72 - GUJARAT HIGH COURT] [Case relied : CCE, Ahmedabad v. Fine Care Biosystems 2009 (7) TMI 226 - CESTAT, AHMEDABAD].

In CCE, Panchkula v. Jamuna Auto Industries Ltd [2014 (4) TMI 4 - CESTAT NEW DELHI], where assessee had taken GTA services for outward transportation of goods beyond place of removal , it was held that as freight was part of the price on which duty had been discharged, Cenvat credit on the same could not be denied to the assessee.

In Lumax Automotives Systems Ltd v. CCE, Delhi-IV [2013 (1) TMI 471 - CESTAT New Delhi], where service tax was paid inclusive of godown rental and outward freight for transportation of goods upto customer’s premises and sale was made on FOR destination basis satisfied prescribed criteria and excise duty paid including freight charges, it was held as per CBEC Circular dated 23-8-2007 that freight upto customer’s premises were integral part of price of goods and as such place of removal was customer’s premises and non-insurance of goods does not mean risk of loss of goods during transit not that of assessee. Accordingly, Cenvat credit of service tax paid on outward freight could not be denied and service of godown rental availed prior to removal of goods to customer’s premises, held as ‘place of removal’, and for storage of raw material, therefore, Cenvat credit of godown rental was admissible.

In CCE, Surat –II v. Gujarat Reclaim and Rubber Products Ltd 2013 (6) TMI 642 - CESTAT AHMEDABAD, where assessee took credit of service tax paid on goods transport services which was availed for outward transportation for export, in view of decisions in cases of CCE ,Rajkot v. Adani Pharmachem P Ltd [2008 (7) TMI 102 - CESTAT AHMEDABAD] ; CCE, Rajkot v. Rolex Rings (P) Ltd [2008 (2) TMI 770 - CESTAT, AHMEDABAD] ; Meghachem Industries v. CCE, Ahmedabad [2011 (4) TMI 221 - CESTAT, AHMEDABAD] and Heera Overseas (P) Ltd v. CCE, Bangalore [2011 (8) TMI 953 - CESTAT, BANGALORE], it was held that in case of export, place of removal was 'place of loading at port of export' and, therefore, outward transportation upto that place was eligible for input service credit.

In Ashirvad Pipes Pvt Ltd v. CCE, Bangalore-I [2013 (12) TMI 1268 - CESTAT BANGALORE] , goods were transported from factory to port for export , while transaction of sale took place at port of shipment ,it was held that port (place of export) was considered as place of removal ,which was thereby covered by definition of input service. Accordingly, without even an attempt to consider the merits, the lower authorities view that the factory gate was the “place of removal” of the goods and, therefore, any service availed for outward transportation of the goods would not qualify to be input service was wrong and the transfer of ownership was signified by Bill of Lading issued at port of export after loading of the goods on the ship.[Case relied: CCE, Madurai v. Stangl Pickles and Preserves 2011 (2) TMI 462 - CESTAT, CHENNAI ]

In Arvee Chem Pharma Pvt Ltd v. CCE, Mysore 2013 (12) TMI 757 - CESTAT BANGALORE, it was held that where final products are exported, ‘place of removal’ was port of export, as such, courier service was qualified to be ‘input service’ in terms of Rule 2(l) of Cenvat Credit Rules, 2004 , hence, Cenvat credit is admissible on the same and demand and penalty imposed was to be set aside.

In CCE v. Inductotherm India (P) Ltd 2014 (3) TMI 921 - GUJARAT HIGH COURT, where services were utilized for purpose of export of final product, said services availed upto ' place of removal' being ' port of export' (i.e., until goods leave India from port), it was held that the service was used in relation to clearance of final products upto place of removal. Therefore, assessee was entitled to credit.

In DSCL Sugar v. CCE, Lucknow 2012 (12) TMI 830 - CESTAT NEW DELHI, it was held that place where goods were stored after clearance from the factory on payment of duty could be considered as ‘place of removal’ for the purpose of Rule 2(l) of Cenvat Credit Rules, 2004. Thus, godowns at Agra and Farrukhabad were to be considered as “place of removal” for the assessee, while notwithstanding the fact that sugar was an item subjected to specific rate of duty.

In Kuntal Granites v. CCE 2007 (3) TMI 540 - CESTAT, BANGALORE, it was held that in case of exports, the place of removal is port where export documents are presented to customs office. [Also relied upon: Rajasthan Spinning and Weaving Mills Ltd. v. CCE, Jaipur 2007 (7) TMI 100 - CESTAT, NEW DELHI ; Oriental Containers v. CCE 2012 (12) TMI 177 - CESTAT, MUMBAI ].

In Rajasthan Spinning and Weaving Mills Ltd. v. CCE, Jaipur 2007 (7) TMI 100 - CESTAT, NEW DELHI, where the assessee availed Cenvat credit from factory to port in respect of goods exported, it was held that place of removal in respect of export of goods is the place where export documents are presented at port. As such availing credit of freight upto place of port was, prima facie, considered as allowable. The Tribunal relied upon Kuntal Granites v. CCE 2007 (3) TMI 540 - CESTAT, BANGALORE; and Gujarat Ambuja Cements Ltd. v CCE 2007 (3) TMI 1 - CESTAT,NEW DELHI.

In RSWM v. CCE 2007 (10) TMI 492 - CESTAT, NEW DELHI , it was held that port is the place of removal in exports as property gets transferred to buyer at port. [ Also relied upon : CCE v. Adani Pharmachem 2008 (8) TMI 307 - CESTAT AHMEDABAD; Modern Petrofils v. CCE 2010 (2) TMI 328 - CESTAT, AHMEDABAD; Cauvery Stones v. CCE 2009 (11) TMI 167 - CESTAT, CHENNAI; CCE v. Nahar Spinning Mills 2012 (7) TMI 412 - CESTAT, NEW DELHI; CCE v. GMR Industries 2012 (8) TMI 24 - CESTAT, BANGAORE;  Agniplast P Ltd. v. CCE 2012 (9) TMI 735 - CESTAT, AHMEDABAD;  Heera Overseas v. CCE 2011 (8) TMI 953 - CESTAT, BANGALORE ;  Larsen and Toubro v. CCE 2014 (5) TMI 558 - CESTAT MUMBAI].

In CCE v. Rolex Rings 2008 (2) TMI 770 - CESTAT, AHMEDABAD, it has been held that in case of exports, port is the 'place of removal' as exporter continues to be owner of goods till the same are exported. Hence, custom house agent (CHA) and surveyor services which are relating to export business are eligible for Cenvat credit.

In CCE v. Heubach Colour P. Ltd. 2014 (3) TMI 907 - CESTAT AHMEDABAD, since port is place of removal for exports, any expenses or tax incurred till the goods reach the place of export are eligible for Cenvat Credit.

In Ambuja Cements v. Union of India 2009 (2) TMI 50 - PUNJAB & HARYANA HIGH COURT, it has been held that if freight charges form part of assessable value, price is FOR destination, if ownership of goods remains with seller till delivery at customer’s doorstep, transit insurance is borne by assessee and property in goods is not transferred till delivery, outward transportation is ‘input service’ and is eligible for Cenvat credit. Thus, the customer's place will be 'place of removal'.

In CCE, CandST, Belgaum v. Vasavadatta Cements Ltd. 2010 (9) TMI 865 - KARNATAKA HIGH COURT, it was held that since input services was to be interpreted in light of requirement of business and it cannot be read restrictively so as to confine only upto factory or upto depot of manufacture, it would also extends to stage of handling over goods to customers for whom it was meant; therefore assessee was allowed to avail Cenvat credit of service tax paid on freight charges incurred from its depot to customers as 'input service' in case of exports, the place of removal is port and not at factory gate of manufacturer because the legislative intention is to cover all the services which is in relation to such manufacture under the scope of input service.

Thus in case of exports, the place of removal is port and not at factory gate of manufacturer because the legislative intention is to cover all the services which is in relation to such manufacture under the scope of input service.