2016 (1) TMI 519 - AT - Central Excise

Cenvat Credit - service tax paid on outward transportation of finished goods, up to the port, which are meant for export - place of removal - The CHA charges and wharfing charges rendered by the service providers outside the factory, after the clearance of goods from the factory, was also sought to be considered as ineligible input services as these services can neither be considered as used in or in relation to manufacture of cars. Held that - 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 reasons are obvious. Generally it is not intended to make domestically produced goods, when exported to the foreign market, to become uncompetitive, by means of increase in cost. No country wants to export the domestic taxes meant to be levied on domestic consumption of goods and services. Countries either exempt such taxes in respect of goods to be exported including taxes relating to inputs used in the export goods, or there are alternative schemes for providing rebate, drawback of duties suffered by export goods. India is no exception as we also have similar schemes. There are also schemes making available duty-free goods and services for export production. In the event of the benefit of cenvat credit being denied, it would contribute to inescapable rise in costs, making exports uncompetitive in the global market. In view of the settled legal position and in view of the above case laws and the Circular, we are of the view that Port is to be construed as the place of removal for the purpose of exports. As regards customs house agent service and wharfage charges, we are of the view that the same are eligible for cenvat credit in view of the nexus in existence between the goods manufactured and the services under dispute which are essential for export, the same is qualified for credit. Having decided that the place of removal is the Port, we hold that the appellants are eligible for cenvat credit on GTA, CHA and wharfage charges. - Credit allowed. - Decided in favor of assessee.

Summary

Issues:
1. Eligibility of cenvat credit on service tax paid for transportation of goods to the port for export.
2. Eligibility of cenvat credit on CHA charges and wharfage charges for export.

Analysis:
1. The appellant, a car manufacturer, availed cenvat credit on service tax paid for outward transportation of finished goods up to the port for export. The revenue contended that the place of removal is the factory gate, not the port. The appellant argued that the port falls within the definition of "place of removal" as per the Central Excise Act. The Tribunal referred to the circular by the Ministry of Finance/CBEC, clarifying that for exports, the port can be considered the place of removal. The definition of "input services" under the cenvat credit rules also supports the inclusion of outward transportation up to the place of removal. The Tribunal held that the port is the place of removal for exports, allowing cenvat credit on transportation services up to the port.

2. The Tribunal also addressed the eligibility of cenvat credit on CHA charges and wharfage charges for export. It was argued that these services are essential for export and have a nexus with the manufactured goods. The Tribunal referred to previous decisions and the Ministry's circular, which support the eligibility of such charges for cenvat credit. Considering the nexus between the services and export goods, the Tribunal held that CHA and wharfage charges are eligible for cenvat credit. The Tribunal set aside the penalty imposed on the appellant, as cenvat credit was deemed eligible.

3. The Tribunal emphasized the government's policy not to burden export goods with domestic taxes to maintain competitiveness in the global market. Various case laws and the Ministry's circular established that the port can be considered the place of removal for export goods. Denying cenvat credit on essential export services would increase costs and make exports uncompetitive. Therefore, the Tribunal concluded that the port is the place of removal for exports, allowing cenvat credit on transportation and related charges up to the port. The decision set aside the impugned order and allowed the appeal, including the eligibility of cenvat credit on CHA and wharfage charges.