R.K RENGARAJ
Introduction: Time and again a question arises as to whether input service includes services rendered for outward transportation up to place of removal, and the answer is positive. It was held in the case of Commissioner of Central Excise, Vadodara Vs Inox India Ltd., (CESTAT-Ahmedabad 2013, 35 taxmann.com 94) that the exporter respondent is eligible to avail cenvat credit on the service tax paid on CHA and C&F Agent services. According to this recent ruling of the Tribunal, it has been held that in case of export, the place of removal is the Port and all the services used up to the Port are “input services” under Rule 2(1) of Cenvat Credit Rules, 2004.
Facts and Background of the case:
The respondent is a manufacturer of storage tanks etc., and availing the cenvat credit of service tax paid on the CHA Services and C&F Agent services rendered at port of export and used for export of goods. The department denied credit on ground that no credit could be allowed for any service availed beyond ‘place of removal’. The adjudicating authority did not accept the contention raised by the Appellant and demanded the service tax credit wrongly availed by them vide OIO dated 09.11.2009.
Thereafter, the respondent preferred an appeal before the Commissioner (Appeals), and appeal was allowed following the law as has been laid down by the Hon’ble High Court of Mumbai in the case of Ultratech Cement Limited reported in 2010 TIOL-745-HC-MUM-ST.
Legal Provisions:
Cenvat Credit Rules, 2004, Rule 2 (l), the definition of “Input Service” reads as under:
“Input Service” means “Any Service: –
(1) Used by provider of taxable service for providing an output service or,
(2) Used by manufacturer, whether directly or indirectly, in or in relation to the manufacture of final products and clearance of final products from the place of removal and also includes services used in relation to setting up, modernization , renovation or repairs of a factory premise of provider of output service or an office relating to such factory or premises, advertising or sales promotion, market research, storage up to the place of removal, procurement of inputs, activities relating to business, such as accounting, auditing, financing, recruitment and quality control, coaching and training ,computer networking, credit rating, share registry and scrutiny, inward transportation of inputs or capital goods, and outward transportation up to the place of removal.
Though the term “Place of removal” is not defined in the Cenvat Credit Rules, 2004, in Section 4 (3} (c) of the Central Excise Act, 1944, it is defined as follows:
(c “place of removal” – means
(i) factory or any other place or premises of production or manufacture of the excisable goods;
(ii) warehouse or any other place or premises wherein the excisable goods have been permitted to be deposited without [payment of duty;]
(iii) 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.
Reasoning of the Tribunal:– The Department submitted that the issue involved in this case is regarding the interpretation of place of removal, after 31.03.2008. Further, according to the department after the amendment to the definition of the input service, any credit taken on the service tax paid by the service provider which is beyond the place of removal and that cannot be considered as in or in relation to the business. The respondent quoted the identical issue in the case of Heubach Color Pvt Ltd vide final order No.A/992/WZB/AHD/2012 dt 16.07.2012 and Birla Cellulosic vide final order No.A/640/WZB/AHD/2012 dt 03.05.2012 wherein it was considered the port as a place of removal. The tribunal admitted that the first appellate authority was correct in coming to the conclusion that the appellant is eligible to avail cenvat credit on the service tax paid on CHA & C&F Agents services. The CESTAT considered the judgment of the Hon’ble High Court of Bombay in the case of Ultratech Cement Ltd in support of this case. The Department’s Appeal was rejected.
Conclusion:
As decided in the various landmark judgments, the input services are not restricted to services specified after expression “such as “, as it is purely illustrative. The contention of the Assessee is that all activities relating to business would fall under “Input Service and such expenses are paid for the services which are in relation to activity of business and manufacturing. The Honourable Tribunal WZB, AHMEDABAD in the matter of COMMISSIONER OF C. EX., RAJKOT V/s ADANI PHARMACHEM P. LTD. Reported in 2008(12) STR 593 held that Input service includes services rendered for outward transportation up to place of removal, all Service tax paid to facilitate goods to reach place of removal has to be eligible for benefit of Cenvat credit – The CHA services are required to facilitate clearance of final products from place of removal i.e. load port – Credit eligible – Rule 2(1) of Cenvat Credit Rules, 2004. Further, in CCE v. Rolex Rings (2008) 230 ELT 569 (CESTAT SMB), it has been held that in case of exports, port is the ‘place of removal’ as exporter continues to be owner of goods till the same are exported.
In case of exports, the place of removal is port where export documents are presented to customs office – Kuntal Granites v. CCE (2007) 215 ELT 515 (CESTAT) and followed in Rajasthan Spinning & Weaving Mills v. CCE (2007) 8 STR 575 (CESTAT).
Therefore, CHA and C&F services which are relating to export business are eligible for Cenvat credit, as input has to be interpreted in broader context and not in restricted sense.
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