2014 (3) TMI 907 - AT - Central Excise

CENVAT Credit - Security services - Held that - security services are engaged by the respondent in respect of movement of finished goods from factory premises to the port in container. It is also undisputed that such security services were engaged by the appellant due to various incidences of theft of export cargo, at the time of movement of containers is port. On this factual matrix, I find that the security services engaged by the appellant would be required in order to safe-guard the business interest and will be covered under the provisions of Rule 2(l) of CENVAT Credit Rules, 2004 which defines the input services - in respect of export goods, the place of removal is considered as port and if that be so, any expenses or tax till the goods reach the place of export, the benefit of CENVAT Credit has to be extended to the respondent - respondent has made out a case for availment of credit of such Service Tax paid on the security services - Decided against Revenue.

Summary

Issues:
- Eligibility of CENVAT Credit for security services used in the movement of goods from factory to port for export.

Detailed Analysis:

Issue 1: Eligibility of CENVAT Credit
The appeal revolved around the eligibility of CENVAT Credit for Service Tax paid on security services utilized for escorting containers from the factory to the port of export. The lower authorities initially disallowed the credit, stating that such services did not qualify as input services related to the manufacture of finished goods. The Revenue contended that the user test, as per Rule 2(l) and Rule 3(1) of CENVAT Credit Rules, was not satisfied as there was no nexus between the security services and the final product. They argued that services beyond the factory premises did not qualify as input services, citing the Ultratech Cement case. However, the respondent argued that various Tribunal decisions allowed CENVAT Credit for security services and referenced cases like CCE Visakhapatnam Vs. Hindustan Zinc Ltd. The respondent also cited the Coca Cola case, emphasizing that the security services safeguarded the product during business activities until the goods reached the port, considered the place of removal for export.

Judgment:
The judge, after considering the arguments, found the issue to be narrow, focusing on whether the security services were utilized after the manufacturing activity and clearance of goods from the factory. It was established that the security services were essential for safeguarding the export cargo during transit to the port, especially due to theft incidents. The judge concluded that such services fell under the definition of input services as per Rule 2(l) of CENVAT Credit Rules, as they were crucial for protecting the business interest. Additionally, the judge noted that for export goods, the port was considered the place of removal, justifying the extension of CENVAT Credit until the goods reached their export destination. Consequently, the judge upheld the first appellate authority's decision in favor of the respondent, ruling that the respondent was eligible for CENVAT Credit on the Service Tax paid for the security services.

Conclusion:
The judgment affirmed the respondent's right to avail CENVAT Credit for security services used in the movement of goods from the factory to the port for export, emphasizing the importance of safeguarding business interests during transit. The decision highlighted the nexus between the services and the export process, ultimately allowing the respondent to benefit from the CENVAT Credit on the Service Tax paid for the security services.