CESTAT denies CENVAT credit on inland haulage charges from ICD to port for FOB exports

CESTAT New Delhi dismissed the appeal regarding denial of CENVAT credit on inland haulage charges. The appellant, a manufacturer-exporter, claimed credit for transportation charges from ICD to shipping port under FOB terms. The tribunal held that transportation services qualify as input services only up to the place of removal. Since goods were exported on FOB basis and title had passed to customers at factory level, the inland haulage charges from ICD to port were beyond place of removal. Following SC precedent in Ispat Industries Ltd. case, CESTAT upheld the denial of CENVAT credit on such charges.

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Issues Involved:
1. Eligibility of Cenvat Credit on Inland Haulage Charges.
2. Definition and interpretation of "Input Service" under Rule 2(l) of CCR, 2004.
3. Determination of "Place of Removal" for availing Cenvat Credit.
4. Applicability of extended period for issuing Show Cause Notice.
5. Revenue neutrality of the demand.

Summary:

1. Eligibility of Cenvat Credit on Inland Haulage Charges:
The appellant, engaged in the manufacture of Motor Cycle, Scooters, and parts, availed input service credit on service tax paid on Inland Haulage Charges for transporting export goods from Inland Container Freight Station (ICD) to the sea port of loading. The Department alleged ineligibility of this credit, proposing recovery of Rs. 1,79,61,711/- along with interest and penalties. The appellant contested this, arguing that the inland haulage charges are part of the input services as per Rule 2(l) of CCR, 2004.

2. Definition and Interpretation of "Input Service":
The appellant argued that the services fall within the definition of "Input Service" under Rule 2(l) of CCR, 2004, which includes services used in relation to the manufacture and clearance of final products up to the place of removal. The Tribunal referred to the Larger Bench decision in ABB Ltd. vs. CCE and the Supreme Court decision in System's Ltd. Vs. Union of India, emphasizing that the term "in relation to" is broad and inclusive.

3. Determination of "Place of Removal":
The appellant contended that the sea port of export is the place of removal, relying on various Circulars and Tribunal decisions. However, the Department argued that the place of removal is ICD Garhi Harsaru, where the Let Export order was issued. The Tribunal held that the place of removal is where the Let Export order is granted, which in this case is ICD Garhi Harsaru. The Tribunal referred to the Supreme Court's decision in Ispat Industries Ltd., which clarified that the place of removal is where the transfer of property in goods occurs.

4. Applicability of Extended Period for Issuing Show Cause Notice:
The appellant argued that there was no suppression of facts and that the extended period was wrongly invoked. The Tribunal did not find merit in this argument, stating that the appellant's own documents were used to make the case.

5. Revenue Neutrality of the Demand:
The appellant claimed that the demand was revenue neutral. However, the Tribunal upheld the Department's view that the inland haulage charges were incurred beyond the place of removal, making the appellant ineligible for Cenvat Credit on those charges.

Conclusion:
The Tribunal concluded that the Inland Haulage Charges from ICD Garhi Harsaru to the shipping port were for services received beyond the place of removal. Therefore, the appellant was rightly disallowed the availment of Cenvat Credit on these charges. The appeal was dismissed, and the order under challenge was upheld.

[Pronounced in the open Court on 07.03.2024]

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