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Softgel Healthcare Pvt. Ltd. Versus Commissioner of Central Excise, Chennai-III

2016 (5) TMI 1068 - CESTAT CHENNAI

Eligibility to take credit of service tax on the freight expenses incurred towards export outward transportation of goods manufactured - recovery of the credit availed on input services such as outward freight - Held that:- By following the ruling of this Tribunal in the case of Hyundai Motors [2016 (1) TMI 519 - CESTAT CHENNAI], to hold that the appellants are eligible for credit. - By also following the ruling of this Tribunal in the case pertaining to M/s Lucas TVS Limited cited [2016 (4 .....

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der dispute which are essential for export, the same is qualified for credit. Having decided that the place of removal is the Port, hold that the appellants are eligible for cenvat credit on GTA, CHA and wharfage charges. Since credit is held to be eligible for the appellants, levy of penalty is also set aside. - Decided in favour of assessee - Appeal No. E/40313/2015 - Final Order No.40709/2016 - Dated:- 3-5-2016 - SHRI P.K.CHOUDHARY, JUDICIAL MEMBER For the Appellant : Shri M. Karthikeyan, Adv .....

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products manufactured and cleared. The appellant was issued a show cause notice No.12/2012-C.Ex. dated 10.04.2012 and SCN No.26/2012 dt. 16.06.2012 (Page Nos 29 to 36 of this appeal paper book) issued on them. In the said notice it was clearly pointed out that the service tax credit of ₹ 1,50,366/- and ₹ 14,658/- availed by them during the period form 2007-2008 to December 2011 in respect of Outward Transportation of final products on the basis that the said services cannot be consi .....

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ayment of duty, which was also proposed to be demanded. 2. To the above show cause notice the appellant had, sent their reply vide letter dated 03.01.2013 contending that they are eligible to take credit of service tax on the freight expenses incurred towards export outward transportation of goods manufactured. The appellants also submitted in terms of purchase order, they are bound to deliver the goods at the customers place wherein the actual sale of goods takes place. It was further submitte .....

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mbaram-I vide Order in Original No. 06/2013 dated 24.01.2013 confirmed the entire demand of ₹ 2,59,747/- under Rule 15 (2) of Cenvat Credit Rules 2004. 4. Aggrieved with the above said Order in Original dated 24.01.2013, the appellant preferred an appeal before the Commissioner of Central Excise (Appeals), Chennai. The Commissioner (Appeals) vide his Order in Appeal No. 09/2014 dated 10.11.2014 rejected the appeal preferred by the appellant and upheld the above said Order in Original in re .....

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ant had filed their appeal with the Tribunal. 6. Heard both sides. The appellant contended, inter alia, that the order of the lower authority confirming the recovery of the credit availed on input services such as outward freight by stating that the said services will not fall within the definition of "input services" is not sustainable; that from the definition of the term service as contained in Rule 2(1) of the Cenvat Credit Rules 2004, prior to amendment vide Notification No. 03/ .....

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still remains within the definition of "input services" even after the amendment; that in the present case, the appellant had incurred freight charges for outward transportation of finished goods for exports from the place of manufacture to the customer premises. The purpose of manufacturer is to enable the goods manufactured to reach the customer's premises. That the appellant are liable to deliver the goods to the customers premises as per the terms of their contract and hence t .....

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t services; that there is no restriction imposed on the rule to the effect that the place of removal is restricted within India and it cannot be made applicable for the finished goods delivered outside India; that the CBEC has issued a Master Circular bearing No. 97/8/2007 dated 23.08.2007, clarifying the technical issues involved in the service tax and in the instant case it is not in dispute that the freight charges paid on the impugned clearances from the factory gate to the customers premis .....

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s to their customer; thus it can be seen that the Board has clearly clarified that in a situation where a manufacturer effects sale at the destination point (customers premises) in terms of the sale contract / agreement whereby the ownership of the goods remain with the seller / manufacturer of the goods till the delivery of goods in acceptable condition to the purchaser at his doorstep, the seller / manufacturer bears the risk of loss or damage to the goods during transit to the destination; t .....

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ent to the definition of input service , with effect from 01.04.2008, cenvat credit on outward transportation of goods was allowable only when it involved transportation of goods upto the place of removal. Prior to 01.04.2008, the definition of input service allowed credit in respect of transportation from the place of removal. In this case, it is not in dispute that the outward transportation of goods was from the place of removal i.e from the Appellants factory. Thus, it is evident that the .....

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tomers. The freight charges incurred on outward transportation is therefore an activity relating to the manufacture of final products. I find that the ruling of this Tribunal in the case of M/s. Hyundai Motor India Ltd Vs Commissioner of Central Excise, Chennai reported in 2016-TIOL-767-CESTAT-MAD supports their contention. The relevant portion of the said judgment is extracted below:- . the following rulings hold that in the case of export of goods, the place of removal is the port from where t .....

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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 hav .....

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e in hand, as this is a credit of service tax paid for transportation of goods for an export transaction. The value taken by any export benefit / calculations, the FOB value is the criteria. Accordingly, the place of removal for an export benefit / calculations, the FOB value is the criteria. Accordingly, the place of removal for an export transaction is deemed to be the factory gate of the manufacturer . This finding by the adjudicating authority is erroneous and contrary to the ruling of this .....

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the goods 4. The sale and transfer of property in goods (in terms of Section 2 of the Central Excise Act, 1944 and in terms of Sale of Goods Act, 1930 occurred at the customer s premises; that in the instant case, the ownership and the property in goods remained with the appellants till the delivery of the goods at the customer s premises, the risk of loss or damage of the goods during transit is borne by the appellants and the freight charges are integral part of the price of the goods upon whi .....

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