CESTAT allows credit of Service tax on transportation, treating the place where property in goods is transferred in terms of Sale of Goods Act – as “Place of removal”

We are pleased to release a Tax Alert on a recent CESTAT ruling [2016-VIL-180-CESTAT-CHE-CE (batch of appeals)]. CESTAT held that Service tax paid for availing such transportation services was eligible for CENVAT Credit in the hands of the manufacturer-exporter and refund of such credit was allowed since it could not be adjusted against output liability. The decision discusses concepts like ‘place of removal’, definition of input services (pre and post 11 July 2014), provisions of Central Excise, CENVAT Credit, Sale of Goods Act and CBEC Circulars have been discussed at length, for deciding CENVAT credit eligibility with respect to Service tax paid on transportation of goods to the port of export.

While CESTAT has mainly relied upon CBEC Circulars, wherein it is clarified that place of removal is the place where transfer of property in goods takes place, it has not taken note of the recent ruling of Apex Court in the case of Ispat Industries. The SC in Ispat case had held that the place of removal cannot be extended upto the buyer’s premise. Though SC ruling addressed the issue of valuation under Central Excise, it will be necessary to analyse the implication of the interpretation of “place of removal” in the context of CENVAT Credit Rules, particularly in light of CBEC Circulars which are still in force, including the one issued as recent as in 2015