TMI Blog2011 (3) TMI 248X X X X Extracts X X X X X X X X Extracts X X X X ..... ther transportation charges is not included or service rendered for clearance of final products is not included, it is impermissible to read those words as in the earlier portion of the definition, it is specifically provided for. It is a well known rule of interpretation that when the statute uses words and phrases in a particular section, meaning has to be given in each of those sections. By notification No.10/2008-C.E.(N.T.) dated 1.3.2008, the words 'clearance of final products upto the place of removal' were substituted in the place of the words 'clearance of final products from the place of removal'. The intention of the legislature is thus manifest. Till such amendment, the words 'clearance from the place of removal' included transportation charges from the place of removal till it reached the destination, namely the customer. Therefore, the said input service was included in the early part of the definition 2(1)(ii). – Credit of service tax paid on outward transportation allowed prior to 1.4.2008 - CEA. NOS. 141, 140, 139, 138 OF 2009 AND 10 OF 2010, CEA No. 121/2009 - - - Dated:- 23-3-2011 - Appellant Represented by: Shri N R Bhaskar, SCGSC Respondent Represente ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Cenvat Credit Rules, 2004 read with Section 11A of the Central Excise Act, 1944 with interest and penalty. The assessee filed its reply justifying the credit availed and utilised. However, rejecting the contention of the assessee, an order in original came to be passed on 04.05.2007 confirming the demand as well as the interest and penalty. Aggrieved by the said order, the assessee preferred an appeal to the Commissioner of Central Excise and Service Tax (Appeals). The first Appellate Authority upheld the order of the original authority and dismissed the appeal. Aggrieved by the same. the assessee preferred an appeal to the tribunal. The tribunal while considering the application for stay of the operation of the Appellate Authority noticed that the issue involved in this appeal is also involved in the case of M/s.India Cements and others. The said issue had been referred to a larger bench by an order dated 13.08.2007 in M.C.No.412/2007. Therefore, they referred this appeal also to the larger bench. That is how the larger bench of the tribunal considered this appeal. 3. After hearing both the parties and taking into consideration the various judgments rendered by the High Cour ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nding recorded by the larger bench of the tribunal that the services availed by a manufacturer for outward transportation of final products from the place of removal should be treated as an input service, is contrary to the aforesaid statutory provisions and therefore, the same is liable to be quashed. 5. Per contra, the learned counsel appearing for the assessee submitted that though the expression 'place of removal' has been defined under the Act and a restrictive meaning is assigned to the said phrase, the said definition is to be confined only to Section 4 of the Act for the purpose of valuation of excisable goods for purposes of charging of duty of excise. Rule 2 of the Rules makes it clear. The definition contained in the said Rules have the meaning assigned to them in the said rules unless the context otherwise requires. Therefore, even though the phrase place of removal is defined under the Act, as it is expressly stated in sub-Section (3) of Section 4, the said definition is only for the purpose of the said section and not for the purpose of the Act, While interpreting the word 'place of removal' used in other parts of the Act, the meaning assigned to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ning, computer networking, credit rating, share registry and security, inward transportation of inputs or capital goods and outward transportation up to the place of removal. [The word 'from' was substituted by the word 'upto' made effective from 1.4.2008 by notification No. 10/2008-CE(NT) dated 1.3.2008 . 9. The words 'clearance of final products upto the place of removal' appearing in clause (ii) was substituted for the words 'clearance of final products from the place of removal' with effect from 01.04.2008 and earlier to the substitution it read as under: clearance of final products from the place of removal . 10. Rule 2(p) defines 'output service' as under:- Output service means any taxable service, excluding the taxable service referred to in sub-douse (xxp) of clause (105) of section 65 of the Finance Act, provided by the provider of taxable service!, to a customer, client, subscriber, policy holder or any other person, as the case may be, and the expressions provider' and 'provided' shall be construed accordingly 11. Rule 2(q) defines person liable for paying service tax as under:-. pers ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rtakings; (ii) they are relatives; (iii) amongst them the buyer is a relative and a distributor of the assessee, or a sub-distributor of such distributor; or (iv) they are so associated that they have interest directly or indirectly, in the business of each other. Explanation -In this clause - (i) inter-connected undertakings shall have the meaning assigned to it in clause (a) of section 2 of the Monopolies and Restrictive Trade Practices Act, 1969 (54 of 1969); and (ii) relative shall have the meaning assigned to it in clause (41) of section 2 of the Companies Act 1956 (1 of 1956); (c) place of removal means - (i) a factory or any other place or premises of production or manufacture of the excisable goods; (ii) a warehouse or any other place or premises wherein the excisable goods have been permitted to be deposited without [payment of duty:] (iii) a 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; [(cc) time of removal , in respect of the excisable goods removed from the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nal product on or after 10th day of September, 2004. (ii) any input service received by the manufacturer of final product or by the provider of output services on or after the 10th day of September 2004. Explanation.- For the removal of doubts it is clarified that the manufacturer of the final products and the provider of output service shall be allowed CENVAT credit of additional duty leviable under section 3 of the Customs Tariff Act on goods fatting under heading 9801 of the First Schedule to the Customs Tariff Act. 18. A reading of Rule 3 makes it clear that the manufacturer or producer of final products or a provider of taxable service shall be allowed to take credit of the duties, cesses or taxes paid under any one of those heads mentioned therein, provided it is paid on any input or capital goods received in the factory of the manufacturer of final product or premises of the provider of output service and any input service received by the manufacturer of products final product or by the provider of output service including the said duties or tax or cess paid on any input or input service as the case may be, used in the manufacture of intermediate products, by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... om the place of removal up to the place of delivery of such excisable goods. Explanation. 1 to the said rule defines what is 'cost of transportation'. It reads as under: Explanation 1. cost of transportation includes- (i) the actual cost of transportation; and (ii) in case where freight is averaged, the cost of transportation calculated in accordance with generally accepted principles of costing. Explanation.2 reads as under: Explanation 2. For removal of doubts, it is clarified that the cost of transportation from the factory to the place of removal, where the factory is not the place of removal shall not be excluded for the purposes of determining the value of the excisable goods. 22. From the aforesaid rules it is clear that the cost of transportation from the place of removal up to the place of delivery of such excisable goods shall not be included in the value of such excisable goods. 23. The question is upto what stage after manufacturing of the product, whether the service rendered in transporting the finished goods from the place of removal up to the place of delivery, constitutes input service as defined under the Cenva ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng to service tax vide Circular No.97/8/2007-S.T. dated 23.08.2007. It reads as under:- 8. CENVAT Credit: 8.1 ...... (a) ...... (b) ...... (c) Issue: Up to what stage a manufacturer/consignor can take credit on the service tax paid on goods transport by road? Comments: This issue has been examined in great detail by the CESTAT in the case of M/s. Gujarat Ambuja Cements Ltd. v. CCE, Ludhiana [2007 (6) S.T.R. 249 (Tri-D)]. In this case. CESTAT has made the following observations: the post sale transport of manufactured goods is not an input for the manufacturer/consignor. The two clauses in the definition of 'input services' take care to circumscribe input credit by stating that service used in relation to the clearance from the place of removal and service used for outward transportation upto the place of removal are to be treated as input service. The first clause does not mention transport service in particular. The second clause restricts transport service credit upto the place of removal. When these two clauses are read together, it becomes clear that transport service credit cannot go beyond transport upto the place of removal. The t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in force at the relevant point of time. 10. It is, thus, evident that the revenue is precluded from challenging the correctness of the circular even on the ground of the same being inconsistent with statutory provisions. It goes further to limit the right of the revenue to file an appeal against the correctness of the binding nature of the circular. Therefore, there is no escape from the conclusion that the circular is binding on the revenue. 11. The only question then is whether the appellant fulfills the requirements of circular. The first requirement is that the ownership of the goods and the property therein is to remain with the seller of goods till the delivery of the goods in acceptable condition to the purchaser at his door step. The aforesaid condition has to be considered to be fulfilled because the supply of cement by the appellant to its customer is 'FOR destination'. The appellant also bears the freight in respect thereof up to the door step of the customer. The freight charges incurred by it for such sale and supply at the door step of the customer are subjected to service tax which is also duly paid by the appellant 12. The 'input ser ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... guments of the revenue that the inclusive clause in specifically limiting the credit for outward transportation upto the place of removal, has a bearing on the interpretation of the clause and therefore, the expression service relating to clearance from the place of removal cannot cover outward transportation as untenable and ultimately, after relying on the judgment of the Punjab and Haryana High Court in the case of Gujarat Ambuja Cements Ltd. held that the definition of input service has to be interpreted in the light of the requirements of business and it cannot be read restrictively so as to confine the same only upto the factory or upto the depot of manufacturers. 28. Following this Full Bench judgment, the appeals which were pending where the said question arose for consideration, were answered in favour of the assessee and against the revenue. 29. Cenvat Credit Rules. 2004 are framed by the Central Government by virtue of the powers conferred on it both by the Central Excise Act, 1944 and Finance Act, 1994 whereas the Determination of Value of Excisable Goods Rules, 2000 are framed only under the Central Excise Act. Duty or service tax is payable both on goods whi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... irectly or indirectly, in or in relation to the manufacture of final products. It also includes clearance of final products from the place of removal. Therefore, services received or rendered by the manufacturer from the place of removal till it reaches its destination falls within the definition of input service. What are the services that normally a manufacturer would render to a customer from the place of removal? They may be packing, loading, unloading, transportation, delivery, etc., Though the word transportation is not specifically used in the said section in the context in which the phrase 'clearance of final products from the place of removal' is used, it includes the transportation charges. Because, after the final products has reached the place of removal, to clear the final products nothing more needs to be done, except transporting the said final products to the ultimate destination i.e. the customer's/buyer of the said product, apart from attending to certain ancillary services as mentioned above which ensures proper delivery of the finished product upto the customer. Therefore, all such services rendered by the manufacturer are included in the definition ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s 'in respect of the transportation' in a particular manner and did not choose to include within the ambit of the word 'transportation', certain aspects, having regard to the scheme of the Section, the way it is worded, it is not open to the Court to include something which the legislature deliberately did not include in the definition. If the Courts indulge in such interpretation, it amounts to re-writing the provision which is impermissible. Yet another reason for coming to such a conclusion is, in the first part of the restrictive definition 'clearance of final products from the place of removal' is expressly stated. If transportation of final product from the place of removal is included in the phrase 'clearance of final products from the place of removal' again the same cannot be read into the provision under the words 'activities relating to business'. When a particular service was included within the definition, it is not necessary to interpret other provisions of the very same rule to include the said services over again. When a specific provision is made in the first part of the definition portion of the Cenvat Rules which refers to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... earance of final products'. However, when the claims are put forth on the basis of the said circular of 23.8.2007, for benefit of CENVAT credit, even in the cases where the aforesaid conditions are not satisfied relying on the words clearance of final products from the place of removal, the Central Government thought it fit to amend the provision from 1.4.2008 by substituting the word 'upto' in place of 'from', in Clause (ii) of Rule 2(1) making the intention clear i.e. whether it is an inward transportation of input of capital goods or clearance of final products upto the place of removal, any service rendered and service tax paid would fall within the definition of 'input service'. Therefore, it is clear that till such amendment made effective from 1.4.2008 notwithstanding the clarification issued by the Central Government by way of their circular, transportation charges incurred by the manufacturer for 'clearance of final products from the place of removal' was included in the definition of input service. Therefore, the interpretation placed by the Tribunal on the words 'activities relating to business' as including clearance of final ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ;clearance of final products from the place of removal' and the subsequent amendment by notification 10/2008 CE(NT) dated 1.3.2008 substituting the word 'from' in the said phrase in place of 'upto' makes it clear that transportation charges were included in the phrase 'clearance from the place of removal' upto the date of the said substitution and it cannot be included within the phrase 'activities relating to business'. 33. Therefore, it is not necessary to expand the meaning of the word 'activities relating to business' so as to include the transportation of the final product from the place of removal to its destination. Therefore, though the ultimate order passed by the Larger Bench does not suffer from any infirmity, the aforesaid reason assigned by it in coming to the said conclusion is erroneous. 34. For the reasons, which we have assigned in our order, the final order of the Tribunal is legal and valid. We further make it clear that this interpretation is valid till 01.04.2008. In that view of the matter, but for the aforesaid modification, we do not see any merit in these appeals. The substantial questions of law raised are ..... X X X X Extracts X X X X X X X X Extracts X X X X
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