2013 (1) TMI 607 - HC - Service Tax

Service Tax Credit Allowed for Outward Transportation: High Court Upholds Decision

The High Court upheld the Tribunal's decision that Service Tax credit on outward transportation charges is admissible, citing the broad definition of ... Cenvat Credit of Service Tax paid on GTA services - Outward freight - scope of 'input service' - Rule 2(1) of Cenvat Credit Rules, 2004 - period before 1.4.08 - held that:- 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’. 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. The outward transport service used by the manufactures for transportation of finished goods from the place of removal upto the premises of the purchaser is covered within the definition of “input service” provided in rule 2(l) of the Cenvat Credit Rules, 2004. Issues Involved:1. Admissibility of Service Tax credit on Goods Transportation charges for outward freight.2. Place of removal in the context of export for claiming Service Tax credit.3. Interpretation of 'input service' under Rule 2(1) of the Cenvat Credit Rules, 2004.Issue-wise Detailed Analysis:1. Admissibility of Service Tax Credit on Goods Transportation Charges for Outward Freight:The primary issue was whether Service Tax credit on Goods Transportation charges for outward freight is admissible. The Tribunal held that the credit is admissible based on the Larger Bench decision in ABB Ltd., which stated that outward transportation service used by the manufacturer for transporting finished goods from the place of removal to the purchaser's premises falls within the definition of 'input service' as per Rule 2(1) of the Cenvat Credit Rules, 2004. The High Court upheld this view, emphasizing that the definition of 'input service' is broad and includes services used directly or indirectly in the manufacture and clearance of final products from the place of removal.2. Place of Removal in the Context of Export for Claiming Service Tax Credit:The Revenue challenged the Tribunal's decision, arguing that the factory gate, not the port, should be considered the place of removal in export cases. The Tribunal, relying on the ABB Ltd. case, held that in exports on FOR (Free on Board) value, the port is the place of removal. The High Court confirmed this, referencing its previous judgment in Commissioner of Central Excise and Customs vs. Parth Poly Wooven Pvt. Ltd., which established that for exports, the place of removal extends to the port, making Service Tax paid on transportation charges up to the port admissible for credit.3. Interpretation of 'Input Service' Under Rule 2(1) of the Cenvat Credit Rules, 2004:The High Court delved into the statutory interpretation of 'input service' under Rule 2(1). It noted that the definition uses the phrase 'means and includes', indicating an exhaustive definition. The Court cited multiple precedents to explain that 'means' suggests a restrictive definition, while 'includes' is expansive. Ultimately, the Court interpreted 'input service' to cover services used in the manufacture and clearance of final products from the place of removal, which includes outward transportation services. This interpretation aligns with the business requirements and legislative intent, ensuring that services essential for the clearance of goods from the place of removal are included within 'input service'.Conclusion:The High Court dismissed the Revenue's appeal, affirming the Tribunal's decision that Service Tax credit on outward transportation charges is admissible. It reiterated that the place of removal in export cases is the port, not the factory gate, and that the definition of 'input service' under Rule 2(1) of the Cenvat Credit Rules, 2004, is broad enough to include outward transportation services. The judgment underscores the principle that statutory definitions should be interpreted in light of business necessities and legislative intent.