Custom, Excise & Service Tax Tribunal
M/S. Hyundai Motor India Ltd vs Cce Chennai on 7 October, 2015
IN THE CUSTOMS, EXCISE & SERVICE TAX
APPELLATE TRIBUNAL
SOUTH ZONAL BENCH, CHENNAI
Appeal No. E/Misc/42432/2014 & E/793/2007
(Arising out of Order-in- Original No. 10/2007 dated 28.08.2007 passed by the Commissioner of Central Excise Chennai,)
M/s. Hyundai Motor India Ltd Appellant
Versus
CCE Chennai, Respondent
Appearance:
Shri. S. Muthuvenkataraman , Advocate, for the Appellant Ms. Indira Sisupal , AC (AR), for the Respondent CORAM Honble Shri R. Periasami, Technical Member Honble Shri P.K. Choudhary, Judicial Member Date of Hearing/Decision : 07/10/2015 Final Order No. 41797 / 2015 Per P. K. Choudhary This appeal is filed by M/s.Hyundai Motors Private Limited (Appellant), engaged in the manufacture of Motor Cars. The appellant company had been issued with a show cause notice No.19/2007 dated 16.5.2007, alleging that the cenvat credit availed on service tax paid by them on outward transportation of finished goods, up to the port, which are meant for export, as erroneous. The revenues contention is that the place of removal is the factory gate of the appellant and not the port, as claimed by the appellant. The CHA charges and wharfing charges rendered by the service providers outside the factory, after the clearance of goods from the factory, was also sought to be considered as ineligible input services as these services can neither be considered as used in or in relation to manufacture of cars.
2. The Ld. Counsel Sri. S.Muthu Venkataraman, Advocate appearing on behalf of the appellant company contended, interalia, that they paid the freight up to the port and availed credit in respect of the same, that there is no incorrectness as to the availment of credit and the same is availed in accordance with the provisions of cenvat credit rules 2004; that the appellant clarified that as per section 4(3)C of the Central excise Act defining place of removal, it is evident that even services beyond the factory gate can be availed as input services as clause III of section 4(3)C does not restrict the availment of credit with regard to freight charges incurred up to the port and hence place of removal also includes port as the provisions of clause (iii) of section 4(3)(C) reading as any other place or premises where excisable goods are to be sold after their clearance from the factory from where such goods are removed; that any other place or premises, other than a factory / depot from where the goods are ordinarily kept at a place temporarily to be sold at a later date would fall within the ambit of the definition place of removal and thus the intention of the legislature is to include all places other than the factory/depot and a premises not necessarily owned by the appellant under the definition of the place of removal and is therefore , an inclusive definition; that any premises including port from where the goods are cleared subsequently, falls within the ambit of the definition., that place of removal as the cars cleared from factory are kept at the port before dispatch to their respective destination they are meant for; that cars once cleared from the factory are not considered as sale and the sale is said to have been concluded and recognized only when the same is loaded into the vessel and bill of lading is received until which time, appellant continues to be responsible for the cars lying in the port and are treated as stock in trade in the books of account as the risk and rewards are envisaged under the sale of goods Act, is not passed on to the buyer as the contract with the foreign buyer is on FOB, CFR and/or CIF basis; that it is well laid out that if the goods are for sale FOB delivery and the property in goods pass to the buyers place, then that will be the place of removal.
3. The Ld. A.R. reiterated the findings of the adjudicating authority and submitted that, a. The appellants are only the manufacturers, and not provider of output service to be entitled to the cenvat credit on GTA, CHA and wharfage services.
b. The services in question have not played any part in the activity of manufacture of goods to qualify for the cenvat credit.
c. It is very settled legal position that the post sale transportation of manufactured goods is not an input in the manufacture. The Adjudicating Authority has relied upon certain decisions to deny the cenvat credit on such services on the above grounds and had confirmed the impugned demand and imposed a penalty of Rs.1,00,000/- under Rule 15 of the Cenvat Credit Rules, 2004.
4. We find that, the issues to be decided in this are as under:-
a. Whether the service tax paid on the cost of transportation of goods from the factory to the Port for the purposes of export would be eligible to cenvat credit in terms of cenvat credit rules?
b. Whether the CHA charges, Wharfage charges rendered by the service providers beyond the factory for the purpose of export would be eligible to cenvat credit in terms of the cenvat credit rules?
5. After hearing both sides, and on perusal of records, we find that the issue regarding determination of the place of removal in respect of exports is settled by the Ministry of Finance/ CBEC through the Circular No.999/6/2015-Cx dated 28.2.2015 which is binding on the department. In this context, we would refer to the definition of input services as it existed during the period in question which reads as follows :
Input services means any service
(i) used by a provider of taxable service for providing an output service; or
(ii) used by the 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 includes services used in relation to setting up, modernization, renovation or repairs of a factory, premises of provider of output service or an office relating to such factory or premises, advertisement, 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 security, inward transportation of inputs or capital goods and outward transportation up to the place of removal It may be seen from the above definition that the cenvat credit is admissible not only when input services are used by the manufacturer whether directly or indirectly in relation to manufacture of the final products and it also covers input services used by the manufacture for clearance of final products from the place of removal. The input service definition also covers the inclusive portion services which involve activities relating to business and also outward transportation up to place of removal. The Commissioners finding that these services are not related to manufacture, as transportation up to the port for exports is a post sale transportation, cannot be sustained in view of the definition cited above, which covers broadly any input service in relation to even clearance of the final products from the place of removal and outward transportation of goods up to the place of removal.
6. Now the question is, whether in the facts of this case, the Commissioner is right in holding that the port is not at all the place of removal for export. The answer to this point is that the Ministry in the above circular has come out with the clarification. At para 6 of the circular, it has been clearly clarified that in case of clearance of goods for export by manufacturer /exporter, shipping bill is filed by the manufacturer/ exporter and goods are handed over to the shipping line. After the net export order is issued, it is the responsibility of the shipping line to ship the goods to the foreign buyer , that the exporter having no control over the goods. In such a situation, transfer of property can be said to have taken place at the port where the shipping bill is filed by the Manufacturer / Exporter and place of removal would be this port. Accordingly, the Ministry/CBEC have clarified the eligibility to cenvat credit could be determined accordingly. The above circular of the Board which has been issued recently calling upon the representations from the Trade clearly establishes that so far as the Ministry/Exporter is concerned, the port is the place of removal for exports. In the instant case, the fact that the appellants are manufacturer/Exporter is not denied. Therefore, the instructions from the Ministry/CBEC referred to above are squarely applicable to the facts of this case and this instruction is binding on the department.
7. We also find that in a recent decision of the Tribunal in the case of Satya Saheb Kore Wanana SSK Limited vs CCE, Kolhapur reported in 38 STR 575, the Tribunal, relying on the earlier decision has allowed the credit in respect of service tax paid on transportation of goods holding that the Railway Station and the load port are places of removal covered under the definition of place of removal. In view of the settled legal position in terms of the Ministrys own circular and the Tribunal decision, we hold that in the instant case, the service tax paid on DTA services, CHA services and their services up to the port would be service up to the place of removal and would be eligible to cenvat credit in terms of the definition itself.
8. Apart from the circular referred to above, the following rulings hold that in the case of export of goods, the place of removal is the port from where the goods are exported.
1. CCE, Madurai vs Tata Coffee Lex 2013-TIOL 209 CESTAT, Madras.
2.Amalgamations Repco Ltd vs CCE, Chennai and others 2012 TIOL 369, CESTAT Mad.
3.Dynamic Industries vs CCE, Daman 2012 TIOL 1514 CESTAT-AHM The crux of the above and other allied case laws is that it is the undisputed policy of the Government not to burden the export goods with domestic taxes as has been noted in various decisions of the Tribunal. The reasons are obvious. Generally it is not intended to make domestically produced goods, when exported to the foreign market, to become uncompetitive, by means of increase in cost. No country wants to export the domestic taxes meant to be levied on domestic consumption of goods and services. Countries either exempt such taxes in respect of goods to be exported including taxes relating to inputs used in the export goods, or there are alternative schemes for providing rebate, drawback of duties suffered by export goods. India is no exception as we also have similar schemes. There are also schemes making available duty-free goods and services for export production. In the event of the benefit of cenvat credit being denied, it would contribute to inescapable rise in costs, making exports uncompetitive in the global market.
9. In view of the settled legal position and in view of the above case laws and the Circular, we are of the view that Port is to be construed as the place of removal for the purpose of exports. As regards customs house agent service and wharfage charges, we are of the view that the same are eligible for cenvat credit in view of the nexus in existence between the goods manufactured and the services under dispute which are essential for export, the same is qualified for credit. Having decided that the place of removal is the Port, we hold that the appellants are eligible for cenvat credit on GTA, CHA and wharfage charges. Since credit is decided to be eligible for the appellants, levy of penalty is also set aside.
10. In view of the above observations, the impugned order is set aside and accordingly the appeal is allowed. Miscellaneous application is also disposed on the above terms.
(Operative order Pronounced in the open court)
(P.K. CHOUDHARY) ( R. PERIASAMI)
JUDICAL MEMBER TECHNICAL MEMBER
BB
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