2009 (11) TMI 167 - AT - Service Tax

Successful appeal for refund of unutilized CENVAT credit for transportation services to EOUs.

Cauvery Stones Impex (P.) Ltd. Versus Commissioner of Central Excise, Salem

The appeal by a 100% EOU for refund of unutilized CENVAT credit of input services was successful. The court held that GTA service for transportation of ... Notification No. 5/2006-CE, dated 14-3-2006- The appellants herein, who are a 100 per cent EOU, engaged in the manufacture and export of polished granite monuments, slabs and tiles and also cleared few of their finished products to other 100 per cent EOUs, filed refund claim for unutilized CENVAT credit of input services in terms of Notification No. 5/2006-CE, dated 14-3-2006, under the provisions of rule 5 of CENVAT Credit Rules, 2004. The period covered by the refund claims was 1-1-2007 to 31-3-2007 and 1-4-2007 to 30-6-2007. Claim for refund of Rs. 1,04,678 was rejected and the balance sanctioned. The adjudication order was upheld by the lower appellate authority. In the light of the various decisions held that- Refund of unutilized credit is, therefore, to be allowed in the light of the above decisions. In the light of the above discussion, set aside the denial of refund claim of Rs. 1,04,678 and allow the appeal. Issues:Refund claim for unutilized CENVAT credit of input services for a 100% EOU. Rejection of refund claim for certain periods. Eligibility of GTA service as an input service. Consideration of clearances to other 100% EOUs as exports for refund purposes.Analysis:The appellants, a 100% EOU engaged in manufacturing and exporting granite products, filed a refund claim for unutilized CENVAT credit of input services under Notification No. 5/2006-CE. The refund claims covered specific periods and were partially rejected, leading to this appeal. The rejection was based on the contention that GTA service for transportation of export goods was not an eligible input service and that clearances to other EOUs should not be considered for export purposes.Regarding the eligibility of GTA service as an input service, it was argued that the factory gate is the place of removal for the appellants based on a Tribunal decision and a CBEC Circular. The Punjab & Haryana High Court's ruling in another case supported the circular, stating that if the ownership and risk of goods remain with the seller until delivery at the destination, credit of service tax on transportation to that point is admissible. As the goods were exported on an FOB basis, with ownership and risk retained by the assessees until the port of shipment, and freight forming part of the FOB price, the service up to the port was deemed an input service, justifying the refund of Rs. 69,172.Regarding the consideration of clearances to other EOUs as exports for refund purposes, it was argued that such clearances should be treated as exports, citing Tribunal decisions in support. The Tribunal's precedents established that clearances to 100% EOUs should be considered exports, making the refund of unutilized credit permissible. Consequently, the denial of a portion of the refund claim was deemed unjustified, and the appeal was allowed, overturning the rejection of the refund claim of Rs. 1,04,678.In conclusion, the judgment upheld the appellants' entitlement to the refund of unutilized CENVAT credit for input services, recognizing the eligibility of GTA service as an input service for transportation to the port and considering clearances to other 100% EOUs as exports for refund purposes based on relevant legal precedents and circulars.