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TMI Blog2015 (4) TMI 254X X X X Extracts X X X X X X X X Extracts X X X X ..... services are not in relation to the manufacture of final products? 2. Whether the second respondent was correct in law in applying the ratio of the Larger Bench of the Tribunal's decision in the case of CCE , Mumbai v. GTC Industries Ltd., (2008 (12) STR, 468 (TR-LB) and ABB Ltd., Vs. CCe Bangalore as reported in 2009 (15) STR 23 (Tri-LB) when these were appealed before the Hon'ble High Court, Bombau on 02.06.2009 with a Central Excise Appeal Lodging No.34 of 2009 and before Hon'ble High Court of Karnataka with a Central Excise Appeal (CEA) No.121 of 2009?" 2. The brief facts are as follows: The assessee in this case availed credit of service tax paid for transportation and delivery of goods to their customers and also service tax paid for providing food and beverage at the factory production to their staff and labourers and that was objected to by the Department stating that outdoor catering services and outward freight do not fall within the ambit of definition 'input service', specified under Rule 2(l) of the Cenvat Credit Rules, 2004. The Department was of the view that catering/canteen services and outward freight services were neither used in or i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... STR 468 is a correct law, however, with a rider that where the cost of the food is borne by the worker, the manufacturer cannot take credit of that part of the service tax which is borne by the consumer. 8. For better clarity, the relevant portion of the decision of the Bombay High Court in the case of CCE V. Ultratech Cement Ltd. reported in 2010 -TIOL - 745 - HC- MUM - ST reads as follows: "28. In the present case, the question is, whether outdoor catering services are covered under the inclusive part of the definition of "input service". The services covered under the inclusive part of the definition of input service are services which are rendered prior to the commencement of manufacturing activity (such as services for setting up, modernization, renovation or repairs of a factory) as well as services rendered after the manufacture of final products (such as advertisement, sales promotion, market research etc.) and includes services rendered in relation to business such as auditing, financing ... etc. Thus, the substantive part of the definition "input service" covers services used directly or indirectly in or in relation to the manufacture of final products, whereas the incl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xus with the manufacture of the final product. 16. In our earlier discussion, we have referred to two considerations as irrelevant, namely, use of input in the manufacturing process, be it direct or indirect as also absence of the input in the final product on account of the use of the expression "used in or in relation to the manufacture of final product". Similarly, we are of the view that consideration such as input being used as packing material, input used as fuel, input used for generation of electricity or steam, input used as an accessory and input used as paint are per se also not relevant. All these considerations become relevant only when they are read with the expression "used in or in relation to the manufacture of final product" in the substantive/specific part of the definition. In each case it has to be established that inputs mentioned in the inclusive part is "used in or in relation to the manufacture of final product". It is the functional utility of the said item which would constitute the relevant consideration. 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 no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he present case, the assessee carrying on the business of manufacturing cement by employing more than 250 workers is mandatorily required under the provisions of the Factories Act, 1948 to provide canteen facilities to the workers. Failure to do so entails penal consequences under the Factories Act, 1948. To comply with the above statutory provision, the assessee had engaged the services of a outdoor caterer. Thus, in the facts of the present case, use of the services of an outdoor caterer has nexus or integral connection with the business of manufacturing the final product namely, cement. Hence, in our opinion, the Tribunal was justified in following the Larger Bench decision of the Tribunal in the case of GTC Industries Ltd. (supra) and holding that the assessee is entitled to the credit of service tax paid on outdoor catering service. 33. It is argued on behalf of the revenue that not only the ratio but the decision of the Apex Court in the case of Maruti Suzuki Ltd. (supra) must be applied ipso facto to hold that the credit of service tax paid on outdoor catering services is allowable only if the said services are used in relation to the manufacture of final products. That arg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the definition of 'input service' do not relate to any particular class or category of services, but refer to variety of services used in the business of manufacturing the final products. There is nothing in the definition of 'input service' to suggest that the Legislature intended to define that expression restrictively. Therefore, in the absence of any intention of the Legislature to restrict the definition of 'input service' to any particular class or category of services used in the business, it would be reasonable to construe that the expression 'such as' in the inclusive part of the definition of input service is only illustrative and not exhaustive. Accordingly, we hold that all services used in relation to the business of manufacturing the final product are covered under the definition of 'input service' and in the present case, the outdoor catering services being integrally connected with the business of the manufacture of cement, credit of service tax paid out on catering services has been rightly allowed by the Tribunal. 36........... 37........... 38. We concur with the above decision of this Court in the case of Coca Cola I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... V. ABB Ltd., Bangalore reported in [2011] 44 VST 1, which was rendered on the appeal filed by the Department as against the decision of the full Bench of the Tribunal, while answering the issue whether the services availed by a manufacturer for outward transportation of final products from the place of removal should be treated as an input service in terms of Rule 2 (1) (ii) of the CENVAT Credit Rules, 2004 and thereby enabling the manufacturer to take credit of the service tax on the value of such services, held as follows: "30. The definition of input service contains both the word means and includes , but not means and includes . The portion of the definition to which the word means applies has to be construed restrictively as it is exhaustive. However, the portion of the definition to which the word includes applies has to be construed liberally as it is extensive. The exhaustive portion of the definition of input service deals with service used by the manufacturer. Whether directly 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 manufa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... udes not only the inward transportation of inputs or capital goods but also includes outward transportation of the final product upto the place of removal. Therefore, in the later portion of the definition, an outer limit is prescribed for outward transportation, ie up to the place of removal. 31. The phrase activities relating to business is an omni-bus one and it finds a place in the inclusive definition. The question is, by a judicial interpretation, outward transportation of the final product from the place of removal till it is delivered to the customer, could be construed as falling within the definition of input service . It is a well settled rule of interpretation that, while interpreting a provision, the Court must take note of not only the express words used but also the words which are not used. If the legislature has expressly used the words 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. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l it reached the destination, namely the customer. Therefore, the said input service was included in the early part of the definition 2(i)(ii). Consequently, we cannot read what is expressly provided in the early part of the rule as having been included in the later part of the rule while interpreting the words activities relating to business , though it has been amplified by saying it is only an inward transportation of inputs or capital goods and outward transportation upto the place of removal. The phrase outward transportation upto the place of removal used in the inclusive portion of the definition (the second part), has to be read along with the word inward transportation of input or capital goods. It has no reference to clearance 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 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(i) making the intention clear i. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urred by the manufacturer for such sale and supply at the door step of the customer are subjected to service tax and therefore, it falls within the definition of input service . However, the Larger Bench of the CESTAT following the aforesaid judgment held the expression activities relating to business covers transportation upto the customers place and it is an integral part of the manufacturing business and therefore, credit cannot be denied by relying on a specific coverage of outward transportation upto the place of removal in the inclusive clause. However, the interpretation placed by us on the words 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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