TMI Blog2015 (4) TMI 254X X X X Extracts X X X X X X X X Extracts X X X X ..... the CESTAT in the case of CCE V. GTC Industries Ltd. [2008 (9) TMI 56 - CESTAT MUMBAI] 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. - Therefore, the issue as decided by the Tribunal and the various Courts clearly settled the issue that the Cenvat Credit has been properly availed in respect of outdoor catering services. Outward freight charges - Held that:- Kanartaka High Court in the case of CCE V. ABB Ltd., Bangalore reported in [2011 (3) TMI 248 - KARNATAKA HIGH COURT], 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 - Decided against Revenue. - C.M.A. No. 307 of 2010 - - - Dated:- 20-3-2015 - R. Sudhakar And R. Karuppi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pursued the matter before the Commissioner (Appeals), who allowed the credit with respect to the canteen services and disallowed the credit with respect to freight. As against the said order of the Commissioner (Appeals), the Department as well as the assessee went before the Tribunal. 3. The Tribunal following the Larger Bench decision of the Tribunal in the case of Commissioner of Central Excise, Mumbai V. GTC Industries Ltd. reported in 2008 (12) STR 468 (Tri.-LB) and ABB Ltd., Vs. CCe Bangalore as reported in 2009 (15) STR 23 (Tri-LB) dismissed the appeal filed by the Department and allowed the appeal filed by the assessee holding that Cenvat credit is admissible on 'outdoor catering service' as well as 'outward freight service' as the same are input service relating to business. 4. Being aggrieved by the orders of the Tribunal, the Revenue has filed the present appeal before this Court. 5. Heard learned Standing Counsel appearing for the Revenue and the learned counsel appearing for the assessee and perused the materials placed before this Court. 6. The core issue involved in this appeal is whether the assessee can utilise the cenvat credit facilit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts but also includes various services used in relation to the business of manufacture of final products, be it prior to the manufacture of final products or after the manufacture of final products. To put it differently, the definition of input service is not restricted to services used in or in relation to manufacture of final products, but extends to all services used in relation to the business of manufacturing the final product. 29. The expression activities in relation to business in the definition of input service postulates activities which are integrally connected with the business of the assessee. If the activity is not integrally connected with the business of the manufacture of final product, the service would not qualify to be a input service under rule 2(l) of the 2004 Rules. 30. The Apex Court in the case of Maruti Suzuki Ltd. (supra) has considered the expression 'used in or in relation to the manufacture of final product' in the definition of input under rule 2(k) of 2004 Rules and held as follows :- 14. ... Moreover, the said expression, viz., used in or in relation to the manufacture of the final product in the specific/substantive part o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... product. Hydrogen gas used in the manufacture of sodium cyanide is an eligible input, since it has a significant role to play in the manufacturing process and since the final product cannot emerge without the use of gas. Similarly, Heat Transfer Oil used as a heating medium in the manufacture of LAB is an eligible input since it has a persuasive role in the manufacturing process and without its use it is impossible to manufacture the final product. Therefore, none of the categories in the inclusive part of the definition would constitute relevant consideration per se. They become relevant only when the above crucial requirement of being used in or in relation to the manufacture stands complied with. In our view, one has to therefore, read the definition in its entirety. 31. In our opinion, the ratio laid down by the Apex Court in the case of Maruti Suzuki Ltd. (supra) in the context of the definition of 'input' in rule 2(k) of 2004 Rules would equally apply while interpreting the expression activities relating to business in rule 2(l) of 2004 Rules. No doubt that the inclusive part of the definition of 'input' is restricted to the inputs used in or in relati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f final products, but also includes services used in relation to the business of manufacturing the final products. Therefore, while interpreting the words used in the definition of 'input service', the ratio laid down by the Apex Court in the context of the definition of 'input' alone would apply and not the judgment in its entirety. In other words, by applying the ratio laid down by the Apex Court in the case of Maruti Suzuki Ltd. (supra), it cannot be said that the definition of 'input service' is restricted to the services used in relation to the manufacture of final products, because the definition of 'input service' is wider than the definition of 'input'. 34. Therefore, the definition of input service read as a whole makes it clear that the said definition not only covers services, which are used directly or indirectly in or in relation to the manufacture of final product, but also includes other services, which have direct nexus or which are integrally connected with the business of manufacturing the final product. In the facts of the present case, use of the outdoor catering services is integrally connected with the business of man ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d with the business of manufacturing the final product. Therefore, the observation of the Division Bench in the case of Coca Cola India (P.) Ltd. (supra) has to be construed to mean that where the input service used is integrally connected with the business of manufacturing the final product and the cost of that input service forms part of the cost of the final product, then credit of service tax paid on such input service would be allowable. 39. The Larger Bench of CESTAT in the case of GTC Industries Ltd. (supra) has also observed that the credit of service tax would be allowable to a manufacturer even in cases where the cost of the food is borne by the worker. That part of the observation made by the Larger Bench cannot be upheld, because, once the service tax is borne by the ultimate consumer of the service, namely the worker, the manufacturer cannot take credit of that part of the service tax which is borne by the consumer. Shri Shridharan, learned Counsel for the assessee fairly conceded to the above position in law and in fact filed an affidavit affirmed by a responsible officer of the assessee wherein it is stated that the proportionate credit to the extent embedded in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hough 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 and included in the definition of input service . However, as the legislature has chosen to use the word means in this portion of the definition, it has to be construed strictly and in a restrictive manner. After defining the input service used by the manufacturer in are restrictive manner, in the later portion of the definition, the legislature has used the word includes . Therefore, the later portion of the definition has to be construed liberally. Specifically what are the services which fall within the definition of input service ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ansportation 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 clearance of final products from the place of removal and in the second part (inclusive) of the definition when the phrase used is activities relating to business such as , merely because in that portion of the definition either 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. When the statute provides specifically for a particular co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 008 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 products from the place of removal which occurred already in the first part of Rule 2(i) (ii) prior to 1.4.2008, runs counter to the language employed in the second part of the definition of input service and is to that extent contrary to the legislative intention and therefore, the said finding is unsustainable in law. 32. In Gujarat Ambuja Cements case, the Principal Bench of CESTAT, New Delhi, had taken the view post sale transport of manufactured goods is not an input in manufacture. The two clauses in the definition 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 up to the place of removal are to be treated as input service. The first clause does not mention transport service in ..... X X X X Extracts X X X X X X X X Extracts X X X X
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