FOB export services and place of removal: credit allowed for handling and clearance up to the port of export.

For FOB export sales, services integrally connected with movement, handling, documentation, loading and clearance of goods up to the port of export qualify for CENVAT credit when the port is the place of removal. The Tribunal relied on the binding departmental circular and held that the place of removal may, depending on the facts, extend beyond the factory gate to the export destination. On the facts, the port of export was treated as the place of removal, the factory gate approach adopted by the Commissioner (Appeals) was rejected, and credit on the disputed services was allowed; the related penalty consequences were also set aside.

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Issues: Whether CENVAT credit of service tax paid on services used for export-related handling and clearance was admissible by treating the port of export as the place of removal.

Analysis: The relevant circular made eligibility of credit dependent on the place of removal and recognised that, depending on the facts, the place of removal may extend to the destination point. The Tribunal relied on the binding nature of the departmental circular and the principles applied in export transactions on FOB basis, where services facilitating movement of goods to the port, their handling, documentation and loading form part of the export chain. On the facts, the services in question were connected with export clearance and the Commissioner (Appeals) had erred in treating the factory gate as the place of removal.

Conclusion: The port of export was the place of removal and the appellant was entitled to CENVAT credit on the disputed services.

Final Conclusion: The disallowance of credit and the connected penalty consequences were set aside, and the assessee succeeded in the appeal.

Ratio Decidendi: For export sales on FOB basis, services integrally connected with the movement, handling and clearance of goods up to the port of export qualify for CENVAT credit where the port constitutes the place of removal.

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