TMI Blog2015 (6) TMI 1091X X X X Extracts X X X X X X X X Extracts X X X X ..... d 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? - Held that: - reliance placed on the decision of the case of CCE V. ABB Ltd., Bangalore [2011 (3) TMI 248 - KARNATAKA HIGH COURT], where it was held that 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. Appeal disposed off - decided in favor of assessee. - C.M.A. No: 1276 of 2010 - - - Dated:- 26-6-2015 - Mr. R. Sudhakar and Ms. K.B.K. Vasuki, JJ. For appellant : Ms. R.K. Sekina Reshma For 1st respondent : M/s. Mohammed Shaffiq 2nd res ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tax paid for receiving the services for outward transportation of final products beyond the place of removal by relying on the ratio of the decision of the Larger Bench in M/s. ABB Ltd. v. CCE (2009 (14) S.T.R. 23) where the phrase ''activities relating to business'' was stretched beyond the permissible natural interpretation to include in the definition of ''input service'' all services received by a manufacturer ? '' 2. The brief facts of the assessee's case are as follows: '' (i) The assessee manufactures sugar, molasses, rectified spirit (non-excisable), extra neutral alcohol (exempted), ethanol, denatured ethyl alcohol and fuel oil (dutiable). The assessee was availing Cenvat credit of duty paid on the capital goods and inputs and the service tax paid in respect of input services as per the Cenvat Credit Rules, 2004. On verification of the records it was noticed that the assessee had availed credit of the service tax and education cess paid in respect of cell phone services, catering services and service tax paid on the Goods Transport Agency services in respect of freight charges paid for the outward movement of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alt with the issue with regard to outdoor catering service, in a batch of appeals in C.M.A.Nos.2 of 2010 batch and vide judgment dated 13.02.2015 held in favour of the assessee by following the decision of the Bombay High Court in the case of CCE V. Ultratech Cement Ltd . reported in 2010 -TIOL - 745 - HC- MUM - ST , wherein all the contentions raised by the Revenue has been considered in extenso including the definition of 'input service' as defined in the case of Maruti Suzuki Ltd. V. CCE reported in 2009 (240) ELT 641 (SC). The Bombay High Court came to the conclusion that the decision of the Larger Bench of the CESTAT in the case of CCE V. GTC Industries Ltd. 2008 (12) 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e inclusive part after the substantive part qualified by the place of use. For example, one of the categories mentioned in the inclusive part is used as packing material . Packing material by itself would not suffice till it is proved that the item is used in the course of manufacture of final product. Mere fact that the item is a packing material whose value is included in the assessable value of final product will not entitle the manufacturer to take credit. Oils and lubricants mentioned in the definition are required for smooth running of machines, hence they are included as they are used in relation to manufacture of the final product. The intention of the Legislature is that inputs falling in the inclusive part must have nexus 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, i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uring the course of/after the manufacture of the final products. The fact that the definition of 'input service' is wider than the definition of 'input' would make no difference in applying the ratio laid down in the case of Maruti Suzuki Ltd. (supra) while interpreting the scope of 'input service'. Accordingly, in the light of the judgment of the Apex Court in the case of Maruti Suzuki Ltd. (supra), we hold that the services having nexus or integral connection with the manufacture of final products as well as the business of manufacture of final product would qualify to be input service under rule 2(l) of 2004 Rules. 32. As rightly contended by Shri Shridharan, learned Counsel for the respondent - assessee, in the 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 ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the revenue, that the expression such as in the definition of input service is exhaustive and is restricted to the services named therein, is also devoid of any merit, because, the substantive part of the definition of 'input service' as well as the inclusive part of the definition of 'input service' purport to cover not only services used prior to the manufacture of final products, subsequent to the manufacture of final products but also services relating to the business such as accounting, auditing ....... etc. Thus, the definition of input service seeks to cover every conceivable service used in the business of manufacturing the final products. Moreover, the categories of services enumerated after the expression 'such as' 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 &# ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... law framed by the revenue is answered in the affirmative, i.e., in favour of the assessee and against the revenue. However, the CENVAT credit reversed by the assessee, belatedly, having not been verified by the Excise Authorities, the Excise Authorities are directed to verify the same and pass an appropriate order in that behalf. 9. It is relevant to note that various High Courts have concurred with the above-said principle of the Bombay High Court and followed the above-said decision. 10. 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. 11. With regard to the outward freight charges, the Kanartaka High Court in the case of CCE 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, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ess an omni-bus phrase is used to expand the meaning of the word input service. 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 inputs or capital goods into the factory premises, if a final product emerges, the final product has to be transported from the factory premises toll the godown before it is removed for being delivered to the customer. Therefore, input service includes 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, ieup 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 def ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... words are used, it also includes what is specifically provided. Therefore, the finding recorded by the CESVAT that the phrase and expression activities relating to business admittedly covers transportation upto the customers place was entirely unnecessary. This interpretation of ours find support from the subsequent conduct on the part 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 removalincluded 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(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 tran ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ad together, it becomes clear that transport service credit cannot go beyond transport up to the place of removal. The two clauses, one dealing with general provision and another dealing with a specific item, are not be read disjunctively as to bring about conflict and it defeat the laws scheme. The purpose of interpretation is to find harmony and reconciliation among the various provisions. Giving effect to the said judgment, when the circular was issued by the Board dated 23.8.2007 the circular came up for consideration before the Punjab and Haryana High Court where it was held that when 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 business covers transportation upto the customers place and it is an integral part of the manufacturing business and ther ..... X X X X Extracts X X X X X X X X Extracts X X X X
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