2009 (11) TMI 167 - AT - Service Tax

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

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 ... Refund of unutilized CENVAT credit of input services - factory gate as place of removal - GTA service as eligible input service up to port where place of removal is at port - binding effect of CBEC Circular on department - clearances to other 100 per cent EOUs to be treated as exports for refund purposesFactory gate as place of removal - GTA service as eligible input service up to port where place of removal is at port - binding effect of CBEC Circular on department - Refund of service tax paid on GTA (transportation) up to port is admissible as input service where place of removal is at the port and conditions of the CBEC circular are satisfied. - HELD THAT: - The Tribunal accepted that for the appellants the factory gate constitutes the place of removal in light of earlier authority, and applied CBEC Circular No.97/8/2007-ST which permits credit of service tax on transportation up to the place of sale where ownership, risk and freight being part of price show transfer at that destination. The appellants exported on FOB terms, retained ownership and risk up to port, and freight formed part of the FOB price; consequently the GTA service from factory gate to port qualifies as an input service and refund of the service tax paid thereon is allowable. [Paras 3, 4]Assessees entitled to refund of service tax paid on outward transportation up to the port; refund claim in respect of GTA service allowed.Refund of unutilized CENVAT credit of input services - clearances to other 100 per cent EOUs to be treated as exports for refund purposes - Clearances made to other 100 per cent EOUs are to be treated as exports for the purpose of refund of unutilized CENVAT credit of input services. - HELD THAT: - Relying on Tribunal decisions, the Bench held that supplies to other 100 per cent EOUs qualify as exports for refund purposes and therefore cannot be excluded when computing entitlement to refund of unutilized CENVAT credit. The denial of refund on this ground was therefore unsustainable. [Paras 5]Denial of refund on account of clearances to other 100 per cent EOUs is set aside; such clearances are to be reckoned as exports for refund of unutilized CENVAT credit.Final Conclusion: The appeal is allowed: the denial of the refund claim is set aside and the appellants' refund entitlement is recognised both in respect of service tax on GTA up to port and in respect of clearances to other 100 per cent EOUs, with the adjudication order amended accordingly. 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.