Input tax credit on export CHA services and mandatory canteen catering turns on place of removal and employer-borne cost.

For manufacturer-exporters, CHA services used for export clearances were held admissible as input service credit because the port, ICD or CFS where the shipping bill is filed may be treated as the place of removal once the goods are handed over to the shipping line and the exporter loses control after the let export order. Credit of outdoor catering services for a mandatory factory canteen was also treated as an input service, but only proportionately to the extent the expenditure was borne by the manufacturer; the employee-borne portion was excluded. The appeal was therefore allowed on the export-clearance issue and allowed only in part on the canteen issue.

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Issues: (i) whether credit of CHA services used for export clearances was admissible by treating the port/ICD/CFS as the place of removal; (ii) whether credit of outdoor catering services used in the factory canteen was admissible, and if so, to what extent.

Issue (i): whether credit of CHA services used for export clearances was admissible by treating the port/ICD/CFS as the place of removal.

Analysis: The Circular dated 28.02.2015 clarified that in the case of manufacturer-exporters, goods are handed over to the shipping line after filing of the shipping bill, and after the let export order the exporter has no control over the goods. In that situation, the transfer of property is taken to occur at the port where the shipping bill is filed, and the place of removal is that port or the corresponding ICD/CFS. On that basis, eligibility to credit has to be determined with reference to that place of removal.

Conclusion: Credit of CHA services was admissible and the Revenue's appeal on this issue was dismissed.

Issue (ii): whether credit of outdoor catering services used in the factory canteen was admissible, and if so, to what extent.

Analysis: Under Section 46 of the Factories Act, 1948, read with the consequence prescribed under Section 92 of that Act, canteen is mandatory in the prescribed circumstances. The service tax paid for running the canteen is therefore an input service relating to business, but admissibility is confined to the expenditure actually borne by the manufacturer. The portion of catering cost borne by employees does not qualify for credit.

Conclusion: Credit of outdoor catering services was admissible only proportionately to the extent the expenditure was borne by the assessee and was inadmissible for the employee-borne portion.

Final Conclusion: The assessee succeeded on the CHA services issue and succeeded only partly on the outdoor catering services issue, resulting in a partial allowance of the appeal.

Ratio Decidendi: For export clearances, the place of removal may extend to the port/ICD/CFS where the shipping bill is filed, and credit is admissible accordingly; canteen-related outdoor catering is an input service only to the extent its cost is borne by the manufacturer.

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