TMI Blog2014 (8) TMI 713X X X X Extracts X X X X X X X X Extracts X X X X ..... fall under the criteria and such amount shall be admissible. Clearing and forwarding agent is an agent of the principal. The goods stored by him after clearance from the factory would therefore, be stored on behalf of the principal, and as such the place where such goods are stored by the C & F agent would fall within the purview of sub-clause (iii) of clause (c) of section 4(3) of the Act and as such would be the place of removal. Viewed from that light the services rendered by the C & F agent of clearing the goods from the factory premises, storing the same and delivering the same to the customer would fall within the ambit of rule 2(l) of the Rules as it stood prior to its amendment with effect from 1.4.2008, namely clearance of final products from the place of removal. However, this court is not in agreement with the view adopted by the Tribunal that such services would amount to sales promotion and is, therefore, an input service. For the reasons stated while discussing the issue as regards service commission paid to foreign agent, the services rendered by the C & F agents cannot be said to be in the nature of sales promotion. This issue stands answered accordingly, in fav ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in holding that Credit of Service tax paid on Customs House Agents Services, Shipping Agents and Container Services and Services of Overseas Commission is admissible to the manufacturer as input Service Tax credit , by overlooking the Statutory provision of Rule 2(1) of the Cenvat Credit Rules, 2004 ? 2. The facts in brief for deciding the matter are as under : 2.1 The respondent-assessee is M/s.Dynamic Industries Ltd., which is a manufacturer of dyes and intermediates falling under Chapters 29 and 32 of the schedule to Central Excise Tariff Act, 1985 and is registered with Central Excise. 2.2 During the course of audit of the financial record undertaken by the A.G. Audit Team, it was noticed that the respondent-assessee had taken Cenvat Credit of service tax paid on Custom House Agent Services, Shipping Agent and Container Service for export of finished goods and commission paid to overseas agents. The scrutiny of the record furnished by the respondent-assessee revealed that it had availed services such as Terminal Handling Charges, Documentation, Agency Charges, Transportation, Detention, Repo, Switching Charges, Pallatization Charges, Container Loading, Reposition Ch ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4, 2010 confirmed the recovery of the said cenvat credit proposed in the show cause notice. 2.6 Aggrieved by the same, the respondent-assessee preferred an appeal against the said order-in-original before the Commissioner (Appeals-I), which also upheld the said order-in-original vide order dated July 23, 2010. 2.7 The respondent-assessee preferred a second appeal before the Tribunal challenging the order of Commissioner (Appeals-I) and the Tribunal set aside the impugned order-in-appeal vide its order dated June 11, 2012. 2.8 This has been challenged in the present Tax Appeal proposing the aforementioned question of law for our consideration. 3. The issue thus pertains to availment of cenvat credit of service tax paid on Custom House Agent Service, Shipping Agent and Container Services and services of overseas commission. We have heard in extenso the learned counsel appearing for the Department Mr.Y.N. Ravani, who has vehemently argued that the facts are not in dispute as could be revealed from the letter of the respondent-assessee dated March 07, 2009 that they had availed the services of Terminal Handling Charges, Documentation, Agency Charges, Transportation, etc. un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a Sahkari Chini Mills Ltd. v. Commissioner of Central Excise, Meerut-I, reported in 2010 (260) ELT 321 (SC). (iii) Decision rendered in the case of Commissioner of Central Excise and Customs v. M/s.Ultratech Cement Ltd. while dealing with Tax Appeal Nos.21 to 23 of 2011 (Gujarat High Court). (iv) Commissioner of Central Excise and Customs v. Gujarat Heavy Chemical Ltd., reported in 2011(22) STR 610 (Guj.). (v) Commissioner of Central Excise, Ahmedabad-II v. Cadila Healthcare Ltd., reported in 2013 (30) STR 3 (Guj.). (vi) Commissioner of Central Excise, Nagpur v. Ultratech Cement Ltd., reported in 2010 (260) ELT 369 (Bom.). (vii) Commissioner of Central Excise and Customs v. Parth Poly Wooven Pvt. Ltd., reported in 2012 (25) STR 4 (Guj.). (viii) Deepak Fertilizers and Petrochemicals Corporation Ltd. v. C.C.E., Belapur, reported in 2013(288) ELT 316 (Tri. Mumbai). 4. For and on behalf of the respondent-assessee, the learned counsel Mr.Anand Nainavati fervently argued that the definition of 'input services' did not undergo a change upto Marh 31, 2011. He urged that the respondent- assessee had availed the cenvat credit on all the services in respect of inp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d in the case of Doypack System Pvt. Ltd. v. Union of India, reported in 1988 (36) ELT 201 (SC). 4.5 The learned counsel for the respondent-assessee also has taken support of the circular dated April 29, 2011 passed by the Department of Revenue, Ministry of Finance, where certain clarifications were made with regard to Cenvat Credit Rules, 2004. The relevant issue in tabular form reads as under : 5. Is the credit of Business Auxiliary Service (BAS) on account of sales commission now disallowed after the deletion of expression activities related to business ? The definition of input services allows all credit on services used for clearance of final products upto the place of removal. Moreover activity of sale promotion is specifically allowed and on many occasions the remuneration for same is linked to actual sale. Reading the provisions harmoniously it is clarified that credit is admissible on the services of sale of dutiable goods on commission basis. 5. Upon thus hearing both the sides and on close perusal of the material on record, at the outset the definition of 'input service' which is enumerated in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... manufacture of final product. It was further held that the electricity if cleared to grid for distribution or to joint ventures, etc., process and use test fails and, therefore, the nexus between the process and use gets disconnected and in such scenario, the electricity generated cannot be said to be used in or in relation to manufacture of final product, within the factory. Therefore, the cenvat credit was held not eligible on inputs utilised in generation of excess electricity cleared for a contractual rate or cleared in favour of grid. In other words, the assessee was found entitled to credit on the eligible inputs utilised in the generation of electricity to the extent to which they were using the produced electricity within their factory (for captive consumption). However, the assessee was not held entitled to the cenvat credit to the extent of excess electricity cleared at the contractual rates in favour of joint ventures, vendors, etc., which was sold at a price. The Apex Court also held that unless and until the said input is used in or in relation to the manufacture of final product within the factory of production, the said item would not be termed as an eligibl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to manufacture. This Court applied the ratio of the Apex Court in the case of Maruti Suzuki Ltd. (supra) although the decision has been referred to the Larger Bench, on the ground that such ratio still holds the field. It was held therein that the credit was not available to the assessee as there was no connection with the activity of manufacturing of final product, direct or indirect. It would be profitable to reproduce the relevant paragraphs of the said decision as under : 10. Definition of input service is expressed in the form of 'means' and 'includes'. 'Means' part of the definition contains, inter alia, service used by the manufacturer whether directly or indirectly or in relation to the manufacture of final products and clearance of final products from the place of removal. This definition, of course, is worded to include variety of services used not only for, but in relation to manufacture of final products and also for clearance of final products upto the place of removal. This Court in Tax Appeal No.419 of 2010 and connected matters decided on 6th April 2011 held that the said definition is exhaustive in nature. 11. Despite such wide connot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d., rendered while dealing with Tax Appeal Nos.21 to 23 of 2011, this Court substantially decided whether the service tax credits on services of insurance of the vehicles used for residents of residential colony and nor for the business purpose, are admissible, when such services are not related directly or indirectly to the manufacture of final product, as input service defined under Rule 2(1) of the Cenvat Credit Rules, 2004. Reliance was placed on the decision rendered in the case of Gujarat Heavy Chemicals Ltd. (supra). The Tribunal favoured the assessee's version. Therefore, the Revenue challenged it in the form of Tax Appeal before this Court. Such Tax Appeal was allowed and as the issue raised was closely connected to the controversy in the case of Gujarat Heavy Chemicals Ltd. (supra), this Court held thus : To our mind, though there is somewhat difference in the nature of services involved in the present appeals, in so far as all material aspects are concerned, the entire issue has been discussed threadbare and decided in the above-mentioned judgment in the case of Gujarat Heavy Chemicals Ltd. As already noted, in the case of Gujarat Heavy Chemicals Ltd., the Court ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t credit on clearance of cement manufactured by the assessee. The Department was of the opinion that the outdoor catering was not the input service under Rule 2(l) of the Rules and, therefore, it was not entitled to the service tax paid on the outdoor catering service. The assessee's contention was that the Factories Act, 1948 makes it mandatory for the employer to provide for catering service to the employees working in the plant and administrative office of the assessee-company and since for compliance of the said statutory requirement, the assessee had engaged the services of a caterer and the costs of the food was reimbursed by the assessee to the employees, it was entitled to take credit of the said service tax and utilise the same in terms of cenvat credit on the cement manufactured by the assessee. The Bombay High Court discussing various decisions, as also the provisions of law, has considered as to whether the outdoor catering service is covered under the inclusive part of the definition of the 'input service'. Such question of law framed by the Revenue was held in favour of the assessee and against the Revenue. By holding that the definition of the input serv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ined to include something, the definition is prima facie expansive. On the other hand, when the Legislature uses the expression 'means and includes', the definition is meant to be exhaustive. Such principles, however, are subject to exceptions. 17.1 In the case of V.F. G. Insurance Co. v. M/s. Fraser Ross, AIR 1960 SC 971, the Apex Court observed that when expression means' is used, generally the definition is exhaustive. 17.2 In th case of State of Bombay v. Hospital Mazdoor Sabha, AIR 1960 SC 610, it was observed that it is obvious that the words used in an inclusive definition denote extension and cannot be treated as restricted in any sense ...... Where we are dealing with an inclusive definition it would be inappropriate to put a restrictive interpretation upon terms of wider denotation . 17.3 In the case of Ramanlal Bhailal Patel v. State of Gujarat, AIR 2008 SC 1246 the Apex Court found that 'person' is defined in an inclusive definition. It was observed that in such a case, the use of word 'includes' indicates an intention to enlarge the meaning of the word used in the Statute. 17.4 In the case of Bharat Cooperative Bank (Mumb ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se of the words 'means and includes' in Rule 2(b) would, therefore, suggest that the definition of college is intended to be exhaustive and not extensive and would cover only the educational institutions falling in the categories specified in Rule 2(b) and other educational institutions are not comprehended. 17.6 In the case of M/s.Black Diamond Beverages v. Commercial Tax Officer, Calcutta, AIR 1997 SC 3550, wherein, interpreting the definition of 'sale price' the Apex Court observed as under: 7. It is clear that the definition of 'sale price' in Section 2(d) uses the words 'means' and 'includes'. The first part of the definition defines the meaning of the word 'sale price' and must, in our view, be given its ordinary, popular or natural meaning. The interpretation thereof is in no way controlled or affected by the second part which 'includes' certain other things in the definition. This is a well-settled principle of construction. Craies on Statute Law (7th Edn. 1.214) says : An interpretation clause which extends the meaning of a word does not take away its ordinary meaning . . . . . . Lord Selborne said in Ro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r will include any person who is in charge of such vehicle of the permit holder or any person who is responsible for the management of the place of business of such owner. The owner cannot escape the liability by stating that any person is for the time being in charge of such vehicles, and, therefore, such person is the owner and not the permit holder. 20. The general rule of construction is not only to look at the words but to look at the context, the collocation and the object of such words relating to such matter and interpret the meaning according to what would appear to be the meaning intended to be conveyed by the use of the words under the circumstances. Sometimes definition clauses create qualification by expressions like unless the context otherwise require ; or unless the contrary intention appears ; or if not inconsistent with the context or subjectmater . Parliament would legislate to little purpose , said Lord Macnaghten in Netherseal Co. V. Bourne, (1889) 14 AC 228 , if the objects of its care might supplement or undo the work of legislation by making a definition clauses of their own. People cannot escape from the obligation of a statute by putting a private ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncludes' followed by 'means' in any definition is generally understood to be expanding the definition of the term to make it exhaustive, but in no manner can the expression 'includes' be utilized to limit the scope of definition provided in the main body of the definition. To our mind this was also not the intention of the Legislature in the present case. 20. There, of course, are certain areas which still remain to be cleared. It was vehemently contended before us by the counsel for the Revenue that later portion of the definition which provides for the inclusion clause limits the outward transportation service up to the place of removal. That being so, according to them, the outward transport service utilized by the manufacturer beyond the place of removal would not qualify as an input service within the definition of rule 2(l). We may only notice two things in this regard. Firstly, in our view, when we find that outward transport service is covered by the main body of the definition which provides for means part, as specifically including any service directly or indirectly in or in relation to manufacture of final product or clearance of final product from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on Consulting Engineers Services, Technical Inspector and Certification Services, Construction Service, erection, commissioning and installation service on the ground that these services used in installation of storage tank which is a immovable property and is outside factory premises, are not eligible for service tax credit. The Tribunal upheld the version of the Revenue and dismissed the appeal. The Bombay High Court has ruled in favour of the assessee and against the Revenue and some of the vital findings deserve reproduction hereinbelow : 5. Now at the outset it must be noted that Rule 3(1) allows a manufacturer of final products to take credit inter alia of service tax which is paid on (i) any input or capital goods received in the factory of manufacturer of the final product; and (ii) Any input service received by the manufacturer of the final product. The subordinate legislation in the present case makes a distinction between inputs or capital goods on the one hand and input services on the other other. Clause (i) above provides that the service tax should be paid on any input or capital goods received in the factory of manufacture of the final product. Such a restrictio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... over as we have noted earlier, whereas Rule 3(1) allows a manufacturer of final products to take credit of excise duty and service tax among others paid on any input or capital goods received in the factory of manufacture of the final product, insofar as any input service is concerned, the only stipulation is that it should be received by the manufacturer of the final product. This must be read with the broad and comprehensive meaning of the expression 'input service' in Rule 2(l). The input services in the present case were used by the Appellant whether directly or indirectly, in or in relation to the manufacture of final products. The Appellant, it is undisputed, manufactures dutiable final products and the storage and use of ammonia is an intrinsic part of that process. 8. In the case of Doypack System Pvt. Ltd. (supra), the Apex Court considered at length the object of interpretation of a statute is to discover the intention of the Parliament as expressed in it, considering it as a whole and in its context; and the words used in the statute, if are plain and unambiguous, they must be applied as they stand. It further held as under : 37. In our opinion Sections 3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... terpretation clauses in order to enlarge the meaning of words or phrases occurring in the body of the statute; and when it is so used, these words or phrases must be construed as comprehending, not only such things as they signify according to their natural import but also those things which the interpretation clause declares that they shall include. [See ( i ) Stroud s Judicial Dictionary , 5th edn. Vol. 3, p. 1263 and ( ii ) C.I.T. v. Taj Mahal Hotel 1 , ( iii ) State of Bombay v. Hospital Mazdoor Sabha This has been reiterated in C.I.T. Vs. T.T.K. Health Care Ltd. (2007) 11 SCC 796. In M/s. Mahalakshmi Oil Mills Vs. State of Andhra Pradesh, AIR 1989 Supreme Court 335, the Court dealing with the expression means and includes observed as under : As Lord Watson observed in Dilworth v. Commissioner of Stamps [1899] AC 99 the joint use of the words mean and include can have this effect. He said, in a passage quoted with approval in earlier decisions of this Court: Section 2 is, beyond all question, an interpretation clauses, and must have been intended by the Legislature to be taken into account in construing the expression charitable device or bequest, as it occurs in Sect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d includes is exhaustive. By the word includes services which may otherwise have not come within the ambit of the definition clause are included and by the words means these are made exhaustive. 24. The next expression to be considered from the definition is such as . A few dictionary meanings of the term such as are reproduced Concise Oxford Dictionary, Such as means for example or of a kind that; Chambers Dictionary, Such as means for example: In Good Year India Ltd V/s Collector of Customs 1997 (95) ELT 450 the Supreme Court observed as under: The words such as stainless steel, nickel monel, incoloy, hastelloy in sub-heading (2) are only illustrative of the various metals from which valves can be made but the said description is not exhaustive of the metals. The words such as therefore are illustrative and not exhaustive. In the context of business, these are services, related to the business. They may not be exhaustive, but are illustrative. 10. Reverting to the facts of the instant case in light of the law discussed hereinabove, as noted hereinabove, the Tribunal has taken a stand that where the exports are Free on Board (FOB) basis, the place of removal has to be ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... services used by the manufacturer directly or indirectly in or in relation to manufacture of the final product and in relation to clearance of final product from the place of removal. Definition of term 'input service' being very wide in its expression, wherein number of services used by manufacturer are included in the same, used directly or indirectly. This Court in the case of Parth Poly Wooven Pvt. Ltd. (supra) has held that when the manufacturer transports his finished goods from the factory, without clearance to any other place such as, go-down, warehouse, etc. from where it would be ultimately removed, such service is covered in the expression outward transportation up to the place of removal since such place other than factory gate would be the place of removal. It had been in clear terms held that outward transport service used by the manufacturer for transportation of finished goods from the place of removal up to the premises of the purchaser is covered within the definition of 'input service' provided in rule 2(1) of the Cenvat Credit Rules. Taking this analogy further, the cargo handling service is availed essentially for the purpose of exporting ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urer directly or indirectly in relation to manufacture of final products and clearing of final products upto the place of removal would certainly be covered within the expression as held hereinabove. In the present case, the place of removal would be the port. 9. We notice that in Cadila Healthcare (supra), this Court as referred to hereinabove has dealt with the courier service and the question was that the courier when collects the parcel from the factory gate for further transportation, whether it would fall within the ambit of the term input service as defined under Rule 2(l) of the Rules and such issue is answered in favour of the assessee and against the Revenue. Relevant also will be to refer to the decision of the Cadila Healthcare (supra) and particularly, the clearing and forwarding services. Such services provided by the Clearing and Forwarding Agents in different States in India for activities relating to sale of goods in domestic market. According to the Revenue, such service would commence only after clearance of final products and the service tax paid in respect thereof was not in relation to manufacture of final product. According to the Tribunal, the Clearing an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ry service which is a taxable service, the services are provided by the Commission Agent. The assessee took CENVAT credit of service tax paid on commission paid to the overseas agents for the goods exported. The eligible category of service for availing the credit is that the service should be used directly or indirectly in the manufacture or clearance of final product, as neither for the purpose of sales promotion, the service of overseas commission agent has been used. The denial in the case of Cadila Healthcare (supra) to the commission paid to the overseas agents shall apply to this category of service, where the service is rendered for overseas commission. This is required to be answered in favour of the Revenue and against the assessee. 5.2 xxx xxx xxx (ix) As regards the contention that in any event the service rendered by a commission agent is a service received in relation to the assessee's activity relating to business, it may be noted that the includes part of the definition of 'input service' includes activities relating to the business, such as accounting, auditing, financing, recruitment and quality control, coaching and training, computer network ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntainer Services and (iii) Services of Overseas Commission, is answered partly in favour of the assessee so far as aforesaid category Nos.(i) and (ii) are concerned. Insofar as category No.(iii) i.e. Services of Overseas Commission, is concerned, the same is answered in favour of the Revenue and against the assessee. So far as present appeal is concerned, after extending the period of limitation under the proviso to sections 11A and 11AB of the Act, the show cause notice is issued by the Joint Commissioner, Central Excise, upon the respondent-assessee on the ground of contravention of provisions of Rules 2(1)(ii) and 9(2) read with Rule 3(1) of the Rules. Admittedly, the respondent-assessee had shown availment of CENVAT credit in Part IV and V of ER-1 returns filed by it. The appellant-Department has sought to justify its action by submitting that during the course of audit by the Office of the Accountant General, when a detailed examination of the material was done, it was realised that the respondent-assessee had availed CENVAT credit on the services of all the three categories. The respondent-assessee has rightly pointed out that all the service providers charge the service tax ..... X X X X Extracts X X X X X X X X Extracts X X X X
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