2017 (1) TMI 591 - AT - Central Excise

CENVAT credit - input services - transportation of the finished goods from the factory gate upto the port of export - clearing and forwarding - CHA services - Denial on the ground that these are past manufacturing activities and the services have no nexus either directly or indirectly with the manufacturing activities and the services cannot be held as input services. Held that - I find that in the case of CCEx. Vs. Inductotherm India Pvt. Ltd. 2014 (3) TMI 921 - GUJARAT HIGH COURT the Hon ble Gujarat High Court held that though there is no express inclusion of such service in the definition of input service in Rule 2 (l) of Central Credit Rules 2004 it can be included therein holding that in case of export of final products the place of removal would be the port of shipment of the final product and not factory gate and therefore the manufacturer would be entitled to cenvat credit towards cargo handling as input service under Central Credit Rules 2004 - the appellant is entitled to avail the cenvat credit on the input service in respect of the services used in relation to clearance of the final product upto the port of shipment. Appeal allowed - credit allowed - decided in favor of appellant.

Summary

Issues:
1. Denial of cenvat credit on transportation expenses for export activities.
2. Interpretation of input services in relation to export activities.

Analysis:
The appellant, a manufacturer of Ferro alloy products, faced a Show Cause Notice proposing to deny cenvat credit amounting to ?8,23,944 along with interest and penalty for the period from January 2007 to March 2007. The Adjudicating Authority confirmed the demand and imposed a penalty of ?2,000. The Commissioner (Appeals) upheld the Adjudication Order. The main issue revolved around the appellant discharging service tax using cenvat credit for post-manufacturing activities related to export, such as transportation of finished goods to the port of export. The Revenue argued that these services lacked nexus with manufacturing activities and could not be considered as input services.

The appellant contended that in the case of exports, the port of shipment should be considered the place of removal, and thus, expenses up to that point should be borne by the appellant. Citing the case of CCEx. Vs. Inductotherm India Pvt. Ltd., the appellant argued that cargo handling services for export activities should be considered input services under the Central Credit Rules, 2004. The Gujarat High Court decision highlighted that cargo handling services used for export are integral to the clearance of final products up to the port of shipment, making them eligible for cenvat credit.

The Tribunal agreed with the appellant's argument, referencing the Gujarat High Court decision to support the inclusion of cargo handling services as input services for export activities. It was established that services related to the clearance of final products up to the port of shipment should be eligible for cenvat credit. Consequently, the Tribunal disposed of the appeal in favor of the appellant, allowing them to avail cenvat credit on input services related to the clearance of final products up to the port of shipment.