Cenvat credit on CHA and clearing services for FOB exports upheld where the port is the relevant place of removal.

Credit of service tax on CHA and clearing and forwarding services used for FOB exports was treated as admissible because the place of removal in such transactions extends beyond the factory gate to the port. Since possession of the goods does not pass to the buyer at the factory stage, services used up to the port are integrally connected with clearance and sale of the goods and have the required nexus with manufacture. A Board circular supported this view. On that basis, the services were not treated as unconnected with the manufacturing activity, and the Revenue's challenge failed.

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Issues: Whether credit of service tax paid on CHA services and clearing and forwarding services used in FOB exports was admissible, having regard to the place of removal and the nexus of such services with manufacture.

Analysis: The services were used in connection with export clearances on FOB basis. In such cases, the place of removal is not confined to the factory gate, because possession of the goods does not pass to the buyer at that point and the port becomes the relevant place of removal. The circular of the Board also supported this view. Once the place of removal is treated as the port, the services used up to that stage are integrally connected with the clearance and sale of the goods and cannot be treated as unconnected with manufacture.

Conclusion: Credit on CHA and clearing and forwarding services was admissible and the Revenue's appeal failed.

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