2011 (4) TMI 975 - HC - Central Excise

Service tax on outward transportation (GTA) held eligible as input service for Cenvat credit when used for manufacture or clearance

HC held that service tax paid on outward transportation (GTA) qualifies as an input service for Cenvat credit where used in or in relation to manufacture ... Entitlement to Cenvat credit - service tax paid on Goods Transport Agency (GTA) services - outward transportation beyond the place of removal - scope of the terms 'means and includes' - Rule 2(l) of CCR - expression ‘in relation to manufacture’ - Held that:- The definition of the term ‘input service’, as already noticed, it is coined in the phraseology of “means and includes”. Portion of the definition which goes with the expression means, is any service used by the manufacturer whether directly or indirectly in or in relation to the manufacture of final products and clearance of final products from the place of removal. This definition itself is wide in its expression and includes large number of services used by the manufacturer. Such service may have been used either directly or even indirectly. To qualify for input service, such service should have been used for the manufacture of the final products or in relation to manufacture of final product or even in clearance of the final product from the place of removal. The expression ‘in relation to manufacture’ is wider than ‘for the purpose of manufacture’. The words ‘and clearance of the final products from the place of removal’ are also significant. Means part of the definition has not limited the services only upto the place of removal, but covers services used by the manufacturer for the clearance of the final products even from the place of removal. It can thus be seen that main body of the definition of term ‘input service’ is wide and expansive and covers variety of services utilized by the manufacturer. By no stretch of imagination can it be stated that outward transportation service would not be a service used by the manufacturer for clearance of final products from the place of removal. When we hold that outward transportation would be an input service as covered in the expression ‘means’ part of the definition, it would be difficult to exclude such service on the basis of any interpretation that may be offered of the later portion of the definition which is couched in the expression ‘includes’. As already observed, it is held in several decisions that the expression ‘includes’ cannot be used to oust any activity from the main body of the definition if it is otherwise covered by the expression ‘means’. In other words, the expression ‘includes’ 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. In so far as the cases on hand are concerned, the statutory provisions cover the service used by the manufacturer in relation to the manufacture of the final products or even the clearance of final products from the place of removal. We answer the question accordingly in favour of the assessee and against the revenue. Issues Involved:1. Entitlement to Cenvat credit on service tax paid on Goods Transport Agency (GTA) services for outward transportation beyond the place of removal.2. Interpretation of the term 'input service' under Rule 2(l) of the Cenvat Credit Rules, 2004.3. Applicability of Board's Circular No. 97/8/2007, dated 23-8-2007.4. Judicial precedents and statutory provisions relevant to the issue.Issue-wise Detailed Analysis:1. Entitlement to Cenvat Credit on GTA Services for Outward Transportation Beyond Place of Removal:The primary issue in these appeals is whether the Tribunal was justified in holding that the assessee was entitled to avail Cenvat credit on the service tax paid on GTA service for outward transportation of goods beyond the place of removal, as per the definition in Rule 2(l) of the Cenvat Credit Rules, 2004. The Tribunal had relied on the Larger Bench decision in ABB Ltd. v. C.C.E. & S.T., Bangalore, which supported the assessee's claim.2. Interpretation of the Term 'Input Service' under Rule 2(l) of the Cenvat Credit Rules, 2004:The definition of 'input service' under Rule 2(l) is central to the case. The definition includes services used directly or indirectly in or in relation to the manufacture of final products and clearance of final products from the place of removal. The court noted that the definition is broad and inclusive, covering various services used by the manufacturer, including outward transportation. The court emphasized that the expression 'means and includes' in the definition is intended to be exhaustive and not restrictive.3. Applicability of Board's Circular No. 97/8/2007, dated 23-8-2007:The Revenue argued that without establishing that the sale was on a FOR (Free on Rail) basis and that the goods were delivered by the assessee at the purchaser's doorstep, the assessee could not benefit from the Board's circular. The court, however, found that the main body of the definition of 'input service' already covered outward transportation, making the circular less relevant to the statutory interpretation.4. Judicial Precedents and Statutory Provisions Relevant to the Issue:The court considered several judicial precedents, including Maruti Suzuki Ltd. v. Commissioner of Central Excise and Escorts JCB Ltd. v. Commissioner of Central Excise, which provided context on the interpretation of terms like 'used in or in relation to manufacture.' The court also referred to the statutory provisions under the Finance Act, 1994, and the Central Excise Act, 1944, to interpret the definitions and scope of 'input service.'The court concluded that outward transportation is an input service as it is used by the manufacturer for the clearance of final products from the place of removal. The court dismissed the Revenue's appeals, affirming the Tribunal's decision in favor of the assessee.Conclusion:The court held that outward transportation service used by manufacturers for transporting finished goods from the place of removal to the purchaser's premises is covered within the definition of 'input service' under Rule 2(l) of the Cenvat Credit Rules, 2004. The appeals were dismissed, and the question was answered in favor of the assessee.