2024 (3) TMI 1224 - AT - Central Excise

Tribunal Affirms Eligibility for Cenvat Credit on Port Export Services, Dismissing Revenue's Appeal on Exemption Requirement.

Commissioner of Central Excise, Haldia Versus M/s. Dhunseri Petrochem & Tea Limited (Petroleum Division)

The Tribunal dismissed the Revenue's appeal, affirming the appellant's eligibility to claim Cenvat credit for input services utilized at the port of ... CENVAT Credit - input services utilized by them at the port of export like Port Services, CHA Services, CHA Services and Clearing & Forwarding Services - case of Revenue is that under N/N. 17/2009, the Appellant was eligible to get the exemption from payment of Service Tax on such services - HELD THAT:- There is no compulsion on the part of the appellant to avail the exemption as given under Notification No.17/2009. In the case of M/S. SHYAM METALICS & ENERGY LTD. VERSUS COMMR. OF CGST & CENTRAL EXCISE, BHUBANESWAR COMMISSIONERATE [2023 (2) TMI 1030 - CESTAT KOLKATA], this Bench has relied on the final order in the case of M/S. ELECTROSTEEL CASTING LTD. VERSUS COMMR. OF CENTRAL EXCISE KOLKATA-III [2019 (2) TMI 1023 - CESTAT KOLKATA] and has held that the services rendered was within the definition of Rule 2(l) of Cenvat Credit Rules, 2004. There are no merit in the Appeal filed by the Revenue - appeal dismissed. ISSUES PRESENTED AND CONSIDERED 1. Whether an exporter who receives specified port/CHA/clearing and forwarding services and pays service tax may elect to take Cenvat credit instead of availing exemption under a conditional exemption notification exempting such services for exporters. 2. Whether services rendered at or up to the port/ICD of shipment qualify as being rendered 'upto the place of removal' within the meaning of Rule 2(l) of the Cenvat Credit Rules, 2004, thereby permitting Cenvat credit for service tax paid on those services after the amendment to Rule 2(l). ISSUE-WISE DETAILED ANALYSIS Issue 1: Option between conditional exemption notification and Cenvat credit Legal framework: A conditional exemption notification grants exemption from service tax for specified services used for export subject to conditions, one of which is non-availment of Cenvat credit on the exempted services. The Cenvat Credit Rules, 2004 provide the regimen for taking input and input service credits. Precedent treatment: Tribunal precedent has held that a conditional exemption notification does not impose a compulsion on the exporter to avail the exemption; instead, the exporter may choose either to avail the exemption (and forego Cenvat) or pay tax and claim Cenvat in accordance with CCR. The adjudicatory denial premised on a mandatory election to take exemption has been rejected by prior decisions relied upon in the judgment. Interpretation and reasoning: The notification's condition precluding Cenvat where the exemption is availed implies a mutually exclusive choice but does not by its terms strip away the statutory entitlement to Cenvat when the exporter elects not to avail the exemption. The entitlement to Cenvat remains governed by CCR; absence of express bar in the notification to ever take Cenvat means the exporter retains the option to pay service tax and claim credit. Ratio vs. Obiter: Ratio - The conditional exemption does not compel the exporter to forgo Cenvat; the exporter may elect to avail Cenvat instead of the exemption. Obiter - None additional on this point. Conclusions: Denial of Cenvat solely on the ground that the exporter should have availed the exemption under the notification is not sustainable. The exporter is entitled, subject to compliance with CCR, to claim Cenvat for service tax paid where the exemption has not been availed. Issue 2: Applicability of Rule 2(l) - 'upto the place of removal' and services at port/ICD Legal framework: Rule 2(l) of the Cenvat Credit Rules, as amended, limits Cenvat credit eligibility to inputs and input services received and used 'upto the place of removal.' The question is whether services rendered at port/ICD of shipment constitute services rendered 'upto the place of removal' - i.e., within the extended locus of the manufacturing unit for the purposes of Cenvat. Precedent treatment: Judicial and Tribunal authorities have interpreted 'place of removal' to include the ICD/port of shipment as an extended location of the manufacturing unit; thus, expenses and services incurred from factory gate up to ICD/port are within Rule 2(l). Higher court decisions addressing freight and related logistics costs post-amendment have been considered; where services fall up to the place of removal, Cenvat has been allowed, and where services are beyond the place of removal, credit is disallowed. Interpretation and reasoning: The Tribunal reasons that the ICD/port of shipment functions as an extended location of the manufacturing unit and therefore falls within the definition of 'place of removal.' Consequently, services utilized at the port for export (including port services, CHA services, clearing & forwarding services) are rendered up to the place of removal and are eligible for Cenvat, provided the other conditions of CCR are met. The Tribunal distinguishes services actually rendered after removal from those rendered upto the place of removal; the latter meet the post-amendment test for creditability. Ratio vs. Obiter: Ratio - Services rendered at or up to the ICD/port of shipment qualify as being rendered 'upto the place of removal' and therefore permit Cenvat credit under Rule 2(l) as amended. Obiter - Reliance on specific fact matrices of earlier decisions is explanatory; no departure from binding principles. Conclusions: Services rendered at the port/ICD for facilitating export are within the ambit of 'upto the place of removal' and Cenvat credit for service tax paid on such services is allowable after the amendment to Rule 2(l), subject to compliance with the Cenvat Credit Rules and absent the exporter having availed the conditional exemption. Interrelationship and disposal Cross-reference: Issue 1 and Issue 2 are conjunctive in application - even where a conditional exemption exists, an exporter who elects to pay tax and claim Cenvat may do so; and where the services are rendered up to the port/ICD (i.e., within the place of removal), such Cenvat claim is not barred by the post-amendment wording of Rule 2(l). Final conclusion: The revenue's contention that the exporter was obliged to take the exemption and that services at the port lie beyond the place of removal are both rejected. Cenvat credit claimed on service tax paid for services utilized at the port/ICD in respect of exported goods is allowable where the exemption under the conditional notification is not availed and the services qualify as rendered 'upto the place of removal.'