2016 (5) TMI 1068 - AT - Central Excise

Eligibility to take credit of service tax on the freight expenses incurred towards export outward transportation of goods manufactured - recovery of the credit availed on input services such as outward freight - Held that - By following the ruling of this Tribunal in the case of Hyundai Motors 2016 (1) TMI 519 - CESTAT CHENNAI , to hold that the appellants are eligible for credit. By also following the ruling of this Tribunal in the case pertaining to M/s Lucas TVS Limited cited 2016 (4) TMI 189 - CESTAT CHENNAI , the credit availed by the appellant on outward transportation of export of goods is eligible. In view of the settled legal position and in view of the above case laws and the Circular, it is 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, 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, hold that the appellants are eligible for cenvat credit on GTA, CHA and wharfage charges. Since credit is held to be eligible for the appellants, levy of penalty is also set aside. - Decided in favour of assessee

Summary

Issues:
1. Eligibility of cenvat credit on outward transportation of final products for export.
2. Interpretation of the definition of "input services" under Rule 2(1) of the Cenvat Credit Rules 2004.
3. Application of Master Circular dated 23.08.2007 issued by CBEC.
4. Dispute regarding the place of removal for export transactions.
5. Comparison of various case laws and judgments related to cenvat credit on outward transportation.

Analysis:
1. The case involved a dispute over the eligibility of cenvat credit on outward transportation of final products cleared for export. The appellant contended that the freight charges incurred for such transportation were integral to the manufacturing process, as they were obligated to deliver goods to overseas customers. The Tribunal supported this argument, emphasizing that the government aims to avoid burdening export goods with domestic taxes to maintain competitiveness in the global market.

2. The appellant argued that the definition of "input services" under Rule 2(1) of the Cenvat Credit Rules 2004, prior to an amendment in 2011, was broad and encompassed services indirectly related to manufacturing. They highlighted that the freight charges for outward transportation fell within this definition, even after the amendment. The Tribunal agreed, stating that the transportation of goods for export should be considered an input service eligible for cenvat credit.

3. The appellant relied on the Master Circular dated 23.08.2007 issued by CBEC to support their claim. They demonstrated compliance with the conditions outlined in the circular, emphasizing that the freight charges were not collected from customers but included in the assessable value for excise duty payment. The Tribunal found that the appellant had met the requirements specified in the circular, justifying the eligibility for cenvat credit.

4. There was a disagreement regarding the place of removal for export transactions. The appellant argued that the place of removal should be the customer's premises, where the ownership and risk of goods remained with them until delivery. The Tribunal rejected the adjudicating authority's view that the factory gate should be considered the place of removal, citing previous judgments and case laws supporting the appellant's position.

5. The Tribunal compared various case laws and judgments related to cenvat credit on outward transportation, highlighting decisions that favored granting credit for export-related services. They referenced rulings emphasizing the importance of not burdening export goods with domestic taxes and ensuring competitiveness in global markets. Ultimately, the Tribunal ruled in favor of the appellant, allowing the cenvat credit on outward transportation and setting aside any penalties imposed.

This detailed analysis of the judgment addresses the key issues raised in the case, providing a comprehensive overview of the arguments presented and the Tribunal's decision based on legal interpretations and precedents.