Outward transportation from factory to port is ‘input service’ & Eligible for Cenvat Credit

CESTAT, MUMBAI BENCH

Oriental Containers Ltd.

versus

Commissioner of Central Excise, Thane

ORDER NOS. S/100 & 101/12/SMB/C-IV & A/32 & 33/12/SMB/C-IV

APPLICATION NOS. E/S/1885 & 1886 OF 2010

APPEAL NOs. E/1745 & 1746 OF 2010

MARCH 19, 2012

ORDER

P.R. Chandrasekharan, Technical Member – These say applications and appeals are directed against order-in-appeal No. SB(94)/Th-I/10 & SB (95) Th-I/10 dated 21/07/2010 passed by Commissioner of Central Excise (Appeals), Mumbai.

2. The facts arising for consideration of this case are briefly stated below:

2.1 The appellant is a manufacturer of goods falling under Chapter 76 of the first schedule to the Central Excise Tariff Act, 1985. The appellants export these goods abroad. The appellant availed the credit of the service tax paid on GTA services in respect of the transportation of goods from the factory premises to the port of shipment in India which according to the appellant was the place of removal in respect of export goods. The department was of the view that since these services are rendered outside the factory premises after clearance of the goods, the same is not an input service and, hence, the appellant is not eligible for availing the Cenvat credit on the service tax paid on these services.

3. The Ld. Advocate for the appellant submits that as far as the exports are concerned the place of removal is the port of shipment and not factory and in a number of judicial pronouncements this Tribunal has allowed credit of the service tax paid on the GTA service on outward transportation.

4. The Ld. AR appearing for the revenue reiterates the findings given in the lower adjudicating and appellate authorities orders.

5. I have carefully considered the rival submissions. After hearing both the sides, I am of the view that the appeals can be decided at this stage itself. Therefore, after granting stay from the recovery of dues adjudged, I take up the appeals for consideration.

6. The short question for consideration in this case is which is the place of removal in respect of exports? Is it the factory premises or is it the port of shipment? In the case under consideration, the appellant has availed service tax credit on GTA service, which was utilised for transportation of goods from the factory to the port of shipment. The export orders were FOB/CIF basis. This implies that the goods have to be delivered on board the vessel or at the place of importation by the buyer. As per the provisions of Section 4 of the Central Excise Act, 1944, the transaction value is the value at which the goods are sold by the assessee for delivery at the time and place of removal in an arms length transaction. As per Section 4 (3) (c) the place of removal means a factory or other premises of production of manufacture of excisable goods or a warehouse or any other premises where the excisable goods have been deposited without payment of duty or a depot premises of a consignment agent or any other place or premises from where the excisable goods are to be sold after their clearance from the factory from where such goods are removed. In other words, section 4 of the Act contemplates a place other than the factory also as a place of removal where the sales are effected after clearance from the factory. In the case of an export transaction where FOB price is the consideration, the goods have to be delivered on board the vessel which means the place of delivery is the port of shipment and the value has to be determined as the sale price for delivery at the time and place of removal. Therefore, the place of removal automatically extends upto the port of shipment when the goods are to be delivered on board the vessel. If that is so, the cost of transportation from the factory to the port of shipment will automatically become part of value of the goods and whatever service have been availed upto that point would become an input service. This Tribunal in the case of Kuntal Granites Ltd. v. CCE 2007 (215) ELT 515 (Tri-Bang) considered a identical issue as regards which is the place of removal in respect of exports and it was held that in the case of exports, the place at which the export documents are presented to the Customs officers would be the place of removal. This Tribunal in the case of Modern Petrofils v. CCE 2010 (253) ELT 609 (Trib.-Ahd.) also considered the issue of admissibility of Cenvat Credit of Service Tax paid on GTA service or outward freight from the factory to port of export and held that Cenvat credit on GTA service from the factory to the port of export would be available. Following the ratio of these judgements, in the instant case also I hold that the appellants are rightly entitled for the Cenvat credit of the service tax paid on GTA service utilised for transportation of the export goods from the factory to the port of shipment. Accordingly, I allow the appeal with consequential relief, if any.

NF