2010 (3) TMI 905 - AT - Customs

ENVAT Credit of service tax paid on CHA services availed for export of goods by 100% EOU When sale of goods is on FOB/CIF basis, place of removal is the port where goods are loaded for export Service tax paid on CHA services, is eligible as CENVAT Credit for a manufacturer

Summary

Issues:
1. Denial of cenvat credit on service tax paid on CHA services for clearance of export goods.

Analysis:
The appellant, a 100% EOU engaged in manufacturing and exporting readymade garments, filed a refund claim under Rule 5 of Cenvat Credit Rules, 2004, for unutilized credit on inputs and services. The adjudicating authority disallowed a portion of the claim related to input service tax credit on CHA services and outward transport services for transporting goods to the port. The Commissioner (Appeals) upheld the disallowance, stating that CHA services take place only at the port, post-manufacturing, and are ineligible for cenvat credit. The appellant appealed to the Tribunal, arguing that CHA services were used for assessing export goods, with the port being the place of removal. The Tribunal considered the issue of place of removal and cited a relevant circular to determine eligibility for cenvat credit.

The Tribunal noted that the CHA services were used for clearance of export goods, which took place at the port. Referring to a circular, the Tribunal emphasized that for a manufacturer/consignor, eligibility for credit of service tax paid on transportation during removal of excisable goods depends on the place of removal. In cases of FOB/CIF basis sales, the place of removal is the load port. The definition of input services includes services rendered for outward transportation up to the place of removal, making service tax paid on CHA services eligible for cenvat credit. The Tribunal distinguished a previous decision and rejected the Department's appeal, allowing the appellant's appeal and granting consequential relief.

In conclusion, the Tribunal set aside the order denying cenvat credit on CHA services, following the decision of a co-ordinate Bench. The judgment clarified the eligibility of service tax paid on CHA services for cenvat credit, emphasizing the importance of determining the place of removal for such credits.