2010 (3) TMI 905 - AT - Customs

Tribunal grants cenvat credit for CHA services up to place of removal

The Tribunal allowed the appellant's appeal and granted cenvat credit on CHA services for clearance of export goods, emphasizing the importance of ... CENVAT credit on input services - Customs House Agent (CHA) services - place of removal - input service definition - eligibility of service tax credit for export goods - 100% EOUCENVAT credit on input services - Customs House Agent (CHA) services - place of removal - input service definition - eligibility of service tax credit for export goods - Denial of CENVAT credit of service tax paid on CHA services used for clearance of export goods - HELD THAT: - The Tribunal found that the CHA services were availed to facilitate clearance of export goods and that the formalities subsequent to the goods leaving the appellant's premises took place at the port. Applying the definition of 'place of removal' and the definition of 'input service', the Tribunal followed the co-ordinate Bench decision in Adani Pharmachem P. Ltd. which held that where the place of removal is the load port (as in FOB/CIF sales) services rendered to facilitate outward transportation and clearance up to the place of removal qualify as input services. The Board's clarification that the phrase 'place of removal' must be determined on facts and that input service includes services for outward transportation up to the place of removal and services used directly or indirectly in relation to manufacture and clearance was treated as determinative. The Tribunal therefore concluded that service tax paid on CHA services used for clearance at the load port is eligible for CENVAT credit and that earlier contrary decisions do not apply where facts establish the port as place of removal. [Paras 6, 8, 9]The denial of CENVAT credit on service tax paid for CHA services is set aside and the credit is allowed with consequential relief.Final Conclusion: Following the co-ordinate Bench authority and applying the definition of 'place of removal' and 'input service', the Tribunal allowed the appeal insofar as it denied CENVAT credit on service tax paid for CHA services used for clearance of export goods and set aside the impugned order on that point. Issues:1. Denial of cenvat credit on service tax paid on CHA services for clearance of export goods.Analysis:The appellant, a 100% EOU engaged in manufacturing and exporting readymade garments, filed a refund claim under Rule 5 of Cenvat Credit Rules, 2004, for unutilized credit on inputs and services. The adjudicating authority disallowed a portion of the claim related to input service tax credit on CHA services and outward transport services for transporting goods to the port. The Commissioner (Appeals) upheld the disallowance, stating that CHA services take place only at the port, post-manufacturing, and are ineligible for cenvat credit. The appellant appealed to the Tribunal, arguing that CHA services were used for assessing export goods, with the port being the place of removal. The Tribunal considered the issue of place of removal and cited a relevant circular to determine eligibility for cenvat credit.The Tribunal noted that the CHA services were used for clearance of export goods, which took place at the port. Referring to a circular, the Tribunal emphasized that for a manufacturer/consignor, eligibility for credit of service tax paid on transportation during removal of excisable goods depends on the place of removal. In cases of FOB/CIF basis sales, the place of removal is the load port. The definition of input services includes services rendered for outward transportation up to the place of removal, making service tax paid on CHA services eligible for cenvat credit. The Tribunal distinguished a previous decision and rejected the Department's appeal, allowing the appellant's appeal and granting consequential relief.In conclusion, the Tribunal set aside the order denying cenvat credit on CHA services, following the decision of a co-ordinate Bench. The judgment clarified the eligibility of service tax paid on CHA services for cenvat credit, emphasizing the importance of determining the place of removal for such credits.