2008 (2) TMI 295 - AT - Service Tax

Service tax on customs house agent and surveyor services up to port allowed as input credit since seller retains ownership

CESTAT, Ahmedabad (AT) dismissed the revenue's appeals and held that service tax paid on Customs House Agent and surveyor services used up to the port are ... Input service - Cenvat credit - activities relating to business - place of removalInput service - Cenvat credit - activities relating to business - place of removal - Whether service tax paid on Customs House Agent and Surveyor services utilized for export qualify as input service under rule 2(1) of the Cenvat Credit Rules, 2004 and are eligible for Cenvat credit - HELD THAT: - The Tribunal accepted the Commissioner (Appeals)' reasoning that CHA and Surveyor services availed up to the port are used in relation to clearance of final products and are covered by the phrase 'activities relating to business' within the definition of input service. The respondent remained owner of the goods until export, so the place of removal in the case of exports extends to the port area; consequently services availed till that point are in relation to manufacture/clearance and qualify as input services. The Tribunal relied on Para 8.2 of Board's Circular No. 97/8/2007-ST (23-8-2007) which supports extending place of removal where ownership remains with the seller until delivery at destination. Because CHA and Surveyor services are related to the export business, they fall within the explanation of services admissible as input and eligible for Cenvat credit. The Tribunal rejected the revenue's contention that such services are post-removal, and declined to follow Excel Crop Care Ltd v. CCE [2007] 9 STT 249 (CESTAT - Ahd.) on the ground that that decision did not consider the then applicable definition of input service nor the Board circular relied upon here. [Paras 4, 5, 6]Credit of service tax paid on CHA and Surveyor services utilised by the exporter up to the port is admissible as input service under the Cenvat Credit Rules, 2004; revenue's appeals are rejected.Final Conclusion: The appeals filed by the revenue are dismissed; service tax paid on Customs House Agent and Surveyor services up to the port in relation to export is allowable as Cenvat credit under the definition of input service. Issues:Whether the respondents are entitled to avail credit of service tax paid on the services of Customs House Agent (CHA) and Surveyors as input services.Analysis:1. The issue involved in the present appeals is whether the respondents can claim credit of service tax paid on CHA and Surveyors' services as input services under the Cenvat Credit Rules, 2004. The definition of input services under rule 2(1) includes services used in or in relation to the manufacture of final products and clearance of final products. The appellate authority noted that activities relating to business, such as services of CHA and Surveyors utilized by the appellant at the time of export, are covered under the definition of input services.2. The revenue contended that CHA and Surveyors' services are not utilized in relation to the manufacture and clearance of the final product. They argued that since the factory premises are the place of removal, these services should be considered post-clearance services. However, the appellate authority disagreed, stating that the services are utilized at the time of export when the respondents still own the goods until they reach the port area, which is considered the place of removal for exported goods.3. The appellate authority found support for their interpretation in a Board's Circular, which clarified that when the ownership of goods remains with the seller until the delivery at the destination point, the place of removal extends to that point. Since the ownership of the goods in this case remains with the seller until the port area, all services availed by the exporter till that point are considered input services related to business activities. Therefore, the credit of duty paid on CHA and Surveyors' services is deemed admissible to the respondents.4. The revenue relied on a previous Tribunal's judgment, which held that CHA services for exports do not have a nexus with manufacturing and clearance of products and thus are not eligible as input services for credit. However, the appellate authority rejected this reliance, as the judgment did not consider the definition of input services or the relevant Board's circular that supported the interpretation in the present case.5. Ultimately, the appeals filed by the revenue were rejected, affirming the entitlement of the respondents to claim credit for the service tax paid on CHA and Surveyors' services as input services under the Cenvat Credit Rules, 2004.