2010 (1) TMI 424 - AT - Service Tax

Appeal granted on Cenvat Credit denial for service tax paid by Customs House Agents

The Tribunal allowed the appeal in a case concerning denial of Cenvat Credit for service tax paid by the appellants under 'Customs House Agents' service ... Cenvat credit of input services - place of removal - ownership transfer at destination - definition of input service - Customs House Agent servicesCenvat credit of input services - place of removal - ownership transfer at destination - Customs House Agent services - definition of input service - Admissibility of Cenvat credit of service tax paid on Customs House Agent services relating to exports where ownership is claimed to have been transferred at destination - HELD THAT: - The Tribunal examined the definition of 'input service' in the Cenvat Credit Rules which permits credit of services used 'in relation to the manufacture of final products and clearance of final products from the place of removal' and includes outward transportation up to the place of removal. The Board's clarification (CBEC Circular) that the 'place of removal' is the place at which the assessee transfers ownership of the goods was noted. The appellants contended that, for the consignments in question (exports on FOR destination basis), ownership was transferred at the destination and that the Customs House Agent services were availed up to that place of removal. The respondent relied on authorities denying credit where services are availed at the port and submitted that certain activities involving physical handling are not covered under 'activities relating to business'. Given the appellants' specific claim that ownership passed at destination and their assurance that they can substantiate this before the original authority, the Tribunal did not decide the admissibility on merits but remanded the matter for verification of factual claim regarding transfer of ownership and whether the CHA services were used up to the place of removal. The Tribunal left open the question of admissibility pending the authorities' fresh consideration of the factual evidence, having regard to the statutory definition and Board's clarification. [Paras 5]Appeal allowed by way of remand to the original authority to permit the appellants to establish that ownership of the goods was transferred at the destination (exports being on FOR destination basis) and to determine admissibility of the Cenvat credit accordingly.Final Conclusion: The Tribunal remanded the matter to the original authority for verification of the appellants' claim that ownership passed at destination (exports on FOR destination basis) and for fresh consideration of the admissibility of Cenvat credit of service tax paid on Customs House Agent services; the appeal is allowed to that extent. Issues:1. Denial of Cenvat Credit for service tax paid by the appellants under 'Customs House Agents' service.2. Interpretation of 'place of removal' in the context of Cenvat Credit Rules.3. Admissibility of credit for services used up to the place of removal for exported goods.Analysis:1. The impugned order affirmed the denial of Cenvat Credit of Rs. 31,625 for service tax paid by the appellants under 'Customs House Agents' service related to the export of goods. The Commissioner (Appeals) based the decision on a previous Tribunal case. The appellants argued that the services were incurred up to the port area and that they retained ownership of the goods until delivery to buyers abroad. They cited a CBEC Circular to support their position.2. The authorized representative of the appellant referenced a Tribunal decision in another case where it was held that credit for services used up to the place of removal was admissible. In the case of goods exported, where the sale took place at the port area, the appellant contended they were entitled to credit for service tax paid on CHA services at the port area.3. The learned SDR contended that the credit for service tax paid on input services up to the place of removal was not admissible. They argued that CHA services were not covered under the definition of input services as they were availed at the place of removal. The definition of 'input service' in the Cenvat Credit Rules was discussed, emphasizing activities related to business and physical handling of goods.4. The Tribunal considered the rival submissions and reviewed the definition of 'input service' in the Cenvat Credit Rules. It was noted that the clarification by the Board defined 'place of removal' as the point at which the assessee transferred ownership of the goods. The Tribunal found merit in the appellant's claim that ownership of the consignments was transferred at the destination point. The appeal was allowed by way of remand for the appellants to establish that the CHA services were available up to the place of removal, as exports were on FOR destination basis. The appeal was remanded to the original authority for further proceedings.