Input Services, Place of Removal and Cenvat Credit for exports

[Vartik Choksi]

We are manufactures exporters. We have taken the Cenvat Crdit of CHA, Port for the goods sold on FOB in FY 2011-12. During the course of audit the dept has issued SCN that after 1-4-2008 the said Cenvat Credit credit would not be available as the definition of Rule 2(l) changed to "clearance of final products, upto the place of removal". We have mentioned all those decisions which were given in the article of Dr. Sanjiv Agarwal (dated 31-3-2014) before AC, Excise. However they simply denied saying that the law changed from 1-4-2008. OIO was issued against us. Kindly throw your views and any decisions which are after the period from 1-4-2008 (post change in definition)

[YAGAY and SUN]

Dear Vartik,

On the above matter, only Tribunal may grant you the relief.

Regards,

Team YAGAY & SUN

Dear Vartik,

Since, they have issued Order-in-Original, better to file an appeal with Tribunal.

Thank & regards

[Rajagopalan Ranganathan]

Sir,

    It is held by CESTAT in the case of  COMMISSIONER OF C. EX., RAJKOT Versus ROLEX RINGS P. LTD. [2008 (230) E.L.T. 569 (Tri. - Ahmd.)] = 2008 (2) TMI 770 - CESTAT, AHMEDABAD that "after considering the submissions made by both the sides and the reasoning adopted by Commissioner (Appeals), I find that the CHA and Surveyors’ services are utilized at the time of the export of the goods. The respondents continue to remain the owner of the goods in question till the same are exported. As such, it can be reasonably concluded that the place of removal in case of exported goods is the port area. The above interpretation is also supported by Para 8.2 of the Board’s circular No. 91/8/2007-S.T. dt. 23-8-2007 laying down that where sale takes place at the destination point and the ownership of the goods remain with the seller till the delivery of the goods, the place of removal would get extended to the destination point and the credit of the service tax paid on the transportation up to such place of sale would be admissible. Inasmuch as in the present case also, the ownership of the goods remain with the seller till the port area, it can be safely held that all the services availed by the exporter till the port area are required to be considered as input service inasmuch as the same are clearly related to the business activities. Activities relating to business are covered by the definition of input service and admittedly CHA and Surveyors’ services are relating to the export business. As such, I agree with the reasoning adopted by Commissioner (Appeals) that the credit of duty paid on such services is admissible to the respondents"

   therefore in respect of export of service, the place of removal is port of export.  Therefore services availed by the exporter up to port of export are qualified as input services and service tax paid on such input services is eligible for availing as credit under CENVAT Credit Rules, 2004.

      In view of the above I will advice you to file appeal against the order-in original before the appropriate authorities.

[phaniraju konidena]

Dear Vartik Choksi,

In the case of Modern Profiles Vs. CCE, Vadodara the reported in 2010-28-STT-478 [CESTAT-AHD.] = 2010 (2) TMI 328 - CESTAT, AHMEDABADwhile allowing the appeal has held that Rule 2(1) of Cenvat Credit Rules, 2004 - Cenvat Credit on Input Service - Assessee exported goods on FOB/CIF basis - Whether cenvat credit of service tax paid on GTA service for outward freight from factory to port of export was admissible to assessee.

In another case of Larsen & Toubro Ltd., Vs.CCE, Mumbai reported in 2014 (5) TMI 558 - CESTAT MUMBAI  while allowing the appeal the CESTAT Bench, Mumbai has held that Rule 2(1) of Cenvat Credit Rules, 2004- in case of export of goods, place of removal extends to port of export - Accordingly all services availed upto such place of removal viz. port of export are input services - Therefore, assessee was entitled to input service credit of CHA services availed at port of export for export of goods.

In view of the above settled legal position, you are eligible for cenvat credit.  

AI Summary

Place of removal extending to the port allows Cenvat credit for services up to the port for exporters.
Where exporters retain ownership until delivery at the port, the place of removal extends to the port of export and services availed up to that point (including CHA, surveyors and outward freight) qualify as input services, making the service tax paid on those services admissible as Cenvat credit under the Cenvat Credit Rules.