CENVAT Credit On Escort And Security Services For Goods In Transit Requires Determination Of Place Of Removal: CESTAT [Read Order]
The CESTAT Chennai clarifies that admissibility of CENVAT credit on transit security services depends on contractual determination of place of removal.
The Chennai Bench of the Customs, Excise and Service Tax Appellate Tribunal (“CESTAT”) has held that the eligibility of CENVAT credit for escort and security services used for the transportation of goods of high value depends on the determination of the place of removal and therefore their eligibility cannot be determined mechanically.
The appellant, GE T&D India Pvt. Ltd. is a company engaged in the electrical and transmission business. The company claimed CENVAT credit on various input services from April 2010 to March 2015, including escort and security services employed by the appellant to protect goods of high value during the carriage of goods to the customers.
The Department had issued show cause notices proposing the denial of credit on various services, including escort services, on the ground that these services were available beyond the gate and therefore were post-removal services. The demand along with interest and penalty was confirmed by the adjudicating authority and upheld by the Commissioner (Appeals). The assesseeaggrieved, went in an appeal before the Tribunal.
The assessee claimed that such escort and security services were essential for safe delivery of costly equipment and were an integral part of clearance itself. It was also contended that in many cases the place of removal was not the factory gate as the contracts were on the destination basis, where the risk and responsibility remained with the manufacturer till delivery at the customer’s premises.
The Revenue's case was that the service of escort and security arrangements has been availed after the removal of goods from the factory and thus cannot be regarded as having taken place within the definition of the term "input service" as indicated under Rule 2(l) of the CENVAT Credit Rules, 2004. It has been contended by the Department that the factory gate has to be treated as the default place of removal.
The Tribunal observed that the question of eligibility to CENVAT credit cannot be decided solely by assuming the place of removal as the factory gate. It held that the determination of the place of removal depends on the contractual terms risk transfer freight arrangement and ownership clauses.
By relying on settled jurisprudence, the CESTAT held that if the place of removal extends beyond the factory gate services used up to such place including escort and security services may qualify as eligible input services. As the lower authorities had not examined the contract or the supporting documents to ascertain the actual place of removal the Tribunal remanded the issue for limited factual verification.
The Tribunal comprising Justice P. Dinesha[Judicial Member] and Vasa Seshagiri Rao[Technical Member] explained that credit could not be denied mechanically and must be decided based on facts specific to each transaction.
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