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2015 (11) TMI 167 - MADRAS HIGH COURT

2015 (11) TMI 167 - MADRAS HIGH COURT - TMI - Wrongful availment of CENVAT Credit - outward transportation service - Held that:- Court, in Borg Warner's case (2015 (4) TMI 254 - MADRAS HIGH COURT), on the issue of outward freight charges, had occasion to consider the decision of the Karnataka High Court in the case of CCE - Vs - ABB Ltd., Bangalore - [2011 (3) TMI 248 - KARNATAKA HIGH COURT] : on an identical issue, and answered the issue in favour of the assessee. - Following the above cited de .....

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ng substantial questions of law for consideration :- "i) Whether the Goods Transport Agency service received by a manufacturer of final products as a consignor/consignee for which he is made the person liable for paying service tax under Section 68 (2) of the Finance Act, 1994, can be deemed in terms of the Explanation to Rule 2 (p) of Cenvat Credit Rules, 2004, as an 'output service' provided by him when the said Explanation specifically excludes from its scope a person liable for .....

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:- The respondent/assessee is a manufacturer of monobloc pumps falling under Tariff Item No.8413.7010 of the schedule to the Central Excise Tariff Act, 1985. The assessee is registered with the Central Excise Department. As a manufacturer of excisable goods, the respondent/assessee availed credit of duty paid on inputs, capital goods and service tax on input services under the Cenvat Credit Rules, 2004. On scrutiny of the documents by the Department, it came light that the assessee had wrongly .....

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Rules, 2004. Therefore, a show cause notice was issued to the respondent demanding the wrongful availment of service tax credit to the tune of ₹ 3,03,634/- under Rule 14 of the Rules along with interest and penalty. After adjudication, the adjudicating authority confirmed the demand along with interest and penalty of ₹ 10,000/- vide order dated 30.04.07. 3. Aggrieved by the said order, the assessee preferred appeal to the Commissioner (Appeals), who, while upholding the order of the .....

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filing the present appeal. 5. Heard the learned standing counsel appearing for the appellant/Revenue and the learned counsel appearing for the respondent/assessee and perused the materials available on record. 6. When the matter was taken up, it is brought to the notice of this Court by the learned counsel on either side that the issue raised in this appeal is covered by the decision of this Court in Commissioner of Central Excise, Chennai - Vs - M/s. Borg Warner Morse TEC Murugappa Pvt. Ltd. - .....

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. 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 su .....

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th 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 manufacturer from the place of removal till it reached 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, unl .....

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aid 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 manuf .....

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rvice'. However, after using the omni-bus phrase, examples are given. It also includes transportation. The words used are (a) inward transportation of inputs or capital goods (b) outward transportation upto the place of removal. While dealing with inward transportation, they have specifically used the words 'inputs' or 'capital goods'. But, while dealing with outward transportation those two words are conspicuously missing. The reason being, after inward transportation of inp .....

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rd transportation, i.e. 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 C .....

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e Courts indulge in such interpretation, it amounts to rewriting 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 .....

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ting 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 provide .....

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rt of the Central Government, which amended Rule 2 (i)(ii). 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 th .....

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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 fi .....

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endment 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 products from the place of removal' which occurred alread .....

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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 particular. The second clause restricts transport service credit up to the place of removal. When these two clauses are read together, it becomes clear that transport service credit cannot go beyond transport up to the place .....

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the ownership of the goods and the property remain with the seller of the goods till the delivery of goods in acceptable condition to the purchaser at his door step, the freight charges incurred 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 bus .....

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