2014 (3) TMI 921 - HC - Central Excise

CENVAT Credit - Place of removal - Place of removal is defined in section 4(3)(c) of Central Excise Act, 1944 Cargo Handling Services - Assessee took credit of Cargo Handling Services used for export of goods manufactured by it - Department denied said credit on ground that credit could be availed only upto place of removal, port of shipment cannot be regarded as place of removal - Whether the Tribunal was correct in holding that Credit of Service tax paid on Cargo Handling Services is admissible to the manufacturer as input service tax credit , by overlooking the Statutory provisions of Rule 2(l) of the Cenvat Credit Rules, 2004. Held that - When manufacturer transports his finished goods from factory to any other place such as, go-down, warehouse, etc. from where it would be ultimately removed, such service is covered in expression outward transportation upto place of removal since such place other than factory gate would be place of removal - Taking this analogy further, in case services are availed essentially for purpose of exporting goods, then, place of removal shall have to be essentially port from where goods are actually taken out of country and, accordingly, said services (including transportation of finished goods upto such place of removal being port) would be input service - Therefore, in case of export of final product, place of removal would be port of shipment and not factory gate and therefore, manufacturer would be entitled to credit of input services availed upto such port of shipment . Though there is no express inclusion of cargo handling service in definition of input service; however, in light of precedents, it can be held that in case of export of final product, place of removal would be port of shipment and not factory gate and therefore, manufacturer would be entitled to avail amount claimed towards cargo handling as input service under Cenvat Credit Rules - Since, in this case, cargo handling 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) were service used in relation to clearance of final products upto place of removal - Therefore, assessee was entitled to credit Decided against Revenue.

Issues Involved:
1. Admissibility of credit of service tax paid on cargo handling services as "input service tax credit."
2. Interpretation of the definition of "input service" under Rule 2(l) of the Cenvat Credit Rules, 2004.
3. Determination of the "place of removal" for the purpose of availing input service credit.
4. Applicability of extended period of limitation for recovery of service tax credit.

Issue-wise Detailed Analysis:

1. Admissibility of Credit of Service Tax Paid on Cargo Handling Services as "Input Service Tax Credit":
The core issue was whether the Tribunal was correct in holding that credit of service tax paid on cargo handling services is admissible to the manufacturer as "input service tax credit." The Revenue challenged this on the grounds that cargo handling services availed after the clearance of final products from the factory cannot be termed as "input service" as per Rule 2(l) of the Cenvat Credit Rules, 2004. The Tribunal, however, upheld the claim of the assessee, asserting that cargo handling services used for export qualify as input services.

2. Interpretation of the Definition of "Input Service" under Rule 2(l) of the Cenvat Credit Rules, 2004:
The definition of "input service" under Rule 2(l) was scrutinized, which includes services used directly or indirectly in relation to the manufacture of final products and their clearance from the place of removal. The court referred to previous judgments, notably the case of Commissioner of C.Ex. & Customs v. Parth Poly Wooven Pvt. Ltd., which emphasized that the definition is broad and covers various services utilized by the manufacturer, including outward transportation services.

3. Determination of the "Place of Removal" for the Purpose of Availing Input Service Credit:
The court had to determine if the port of shipment could be considered the "place of removal" for the purpose of availing input service credit. It was argued that if the place of removal is considered beyond the factory gate, then services availed up to the port should be included. The court concluded that in the context of exports, the place of removal extends to the port of shipment, thus allowing the manufacturer to claim credit for cargo handling services.

4. Applicability of Extended Period of Limitation for Recovery of Service Tax Credit:
The court also examined whether the extended period of limitation could be invoked for recovering the service tax credit. The Commissioner (Appeals) and the Tribunal found no suppression of facts by the assessee, as details were provided consistently. Therefore, the extended period of limitation was not applicable.

Conclusion:
The court upheld the Tribunal's decision, affirming that cargo handling services used for exporting goods qualify as "input services" under the Cenvat Credit Rules. The place of removal in the context of exports includes the port of shipment, allowing the manufacturer to claim service tax credit on cargo handling services. The appeal by the Revenue was dismissed, and the authorities' decisions favoring the assessee were maintained.

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