2011 (10) TMI 508 - AT - Service Tax

Whether the CHA and other services availed for export of the goods can be taken as credit by the manufacturers of the goods treating the same as input service - Held that there are some decisions which do not allow credit of service tax paid on CHA services holding that the services availed in the port area are not input services for the manufacture of goods - It is the undisputed policy of the Government not to burden the export goods with domestic taxes as has been noted in various decisions of the Tribunal - the Government under Notification No.17/2009-ST dated 7.7.2009 has since granted exemption to various taxable services provided to an exporter. CHA services are also exempted under Sl. No.11 to the Table annexed to the said Notification. The present cases have arisen apparently in the absence of exemption notification for the previous period. The only way freeing export goods from domestic taxes can be ensured for the period relevant to these appeals is to allow credit of the service tax paid on the CHA and other services in respect of the export consignments so that the exporter would be compensated either by utilization of such credit for payment of other taxes or by taking refund when such utilization is not possible - Appeal is allowed

Summary

Issues:
- Whether CHA and other services availed for export of goods can be considered as credit by manufacturers treating them as input service.
- Discrepancy in decisions regarding the admissibility of credit on CHA services for export.
- Lack of harmonization between legal provisions under Section 37(2) and the CENVAT Credit Rules, 2004.
- Policy considerations for not burdening export goods with domestic taxes.
- Exemption of CHA services and other taxable services provided to exporters under Notification No.17/2009-ST.

Analysis:
1. The primary issue in this judgment revolves around the admissibility of credit on CHA and other services for the export of goods, whether they can be considered as input services by manufacturers. The appeals filed by both the Department and the appellant-assessee pertain to orders allowing or denying such credit by the authorities below.

2. The judgment highlights a series of precedent decisions on this matter, with conflicting views. Some decisions, like those from the Ahmedabad Bench, hold that CHA services for export lack nexus with manufacturing activities. In contrast, other decisions, such as the one from the Chennai Bench, emphasize the relevance of services availed under the Port area to be considered as input services due to their relation to business activities.

3. The judgment discusses the lack of harmonization between Section 37(2) of the Act and the CENVAT Credit Rules, 2004, leading to differing interpretations in various decisions. It also delves into the policy rationale of not burdening export goods with domestic taxes to maintain competitiveness in foreign markets, citing various Tribunal decisions.

4. The Hon'ble Karnataka High Court's stance on excluding services related to export cargo from service tax imposition is highlighted, emphasizing the need for similar exclusions for all services related to the export of goods. The judgment notes the exemption granted to CHA services and other taxable services provided to exporters under Notification No.17/2009-ST.

5. Ultimately, the judgment upholds the impugned orders allowing credit on CHA and other services for export consignments, citing the necessity to compensate exporters by utilizing such credit for other taxes or through refunds. The decision dismisses departmental appeals where credit was allowed and sets aside an appeal where credit was denied, ruling in favor of the admissibility of credit in that particular case.

6. The judgment concludes by disposing of cross-objections in two cases, providing a comprehensive analysis of the legal and policy considerations surrounding the admissibility of credit on CHA and other services for the export of goods, ensuring a balanced approach in line with the overarching policy objectives.