2013 (12) TMI 1025 - HC - Service Tax

High Court ruling: Transportation expenses not 'input service' under Cenvat Rules

Commissioner of Central Excise Versus M/s. Vesuvious India Ltd.

The High Court of Calcutta set aside the judgment of the Customs, Excise and Services Tax Tribunal, ruling that the transportation expenses incurred by a ... Denial of CENVAT Credit - Outward transportation of the goods - CESTAT granted Credit - Held that:- By the amendment made with effect from 1st April, 2008 substituting the word “from” by the word “upto” all that has been done is to clarify the issue. Neither the services rendered to the customer for the purpose of delivering the goods at the destination was covered by the definition of input service prior to 1st April, 2008, nor is the same covered after 1st April, 2008. If the definition provided in Section 2(l)(ii) is read as a whole, it would appear that outward transportation charges or taxes paid in regard thereto is claimable only with regard to those transports which were made from one place of removal to another place of removal - judgment rendered by the learned Tribunal cannot be sustained and the same is, therefore, set aside - Decided against the assessee. Issues:Challenge to judgment of Customs, Excise and Services Tax Tribunal regarding service tax on transportation expenses; Interpretation of 'input service' under Cenvat Rules; Applicability of Circular issued by the Board; Comparison of judgments by Karnataka High Court and Gujarat High Court.Analysis:The High Court of Calcutta addressed the challenge to a judgment by the Customs, Excise and Services Tax Tribunal regarding the claimability of service tax paid by a manufacturer for outward transportation of goods as an input service under the Cenvat Rules. The Tribunal had dismissed the Revenue's appeal following a judgment by the Karnataka High Court in the case of Commissioner of C.Ex & S.T.,LTU, Bangalore vs. ABB Limited. The Revenue contended that the Tribunal should have independently considered the matter rather than relying on the Karnataka High Court judgment. However, the Court disagreed with the reasoning provided by the Karnataka High Court and emphasized that 'input service' does not include post-manufacturing stage expenses except for transportation between places of removal. The Court highlighted that while the Board's Circular provided some relaxation, it did not amend the Rules to include all outward transportation charges as claimable input services.The respondent-assessee relied on the Karnataka High Court judgment and the Gujarat High Court judgment in the case of Commissioner of C. Ex. & Customs vs. Parth Poly Wooven Pvt. Ltd. The Gujarat High Court opined that outward transport service for delivering goods to the purchaser falls within the definition of 'input service' under the Cenvat Credit Rules. However, the Calcutta High Court found the reasoning inadequate and unconvincing. The Court further analyzed the Karnataka High Court's interpretation of the definition of 'input service,' which the Calcutta High Court found to be restrictive and not applicable to all outward transportation charges. The Court clarified that the amendment effective from April 1, 2008, did not change the scope of claimable transportation charges under the definition of 'input service.'In conclusion, the Calcutta High Court set aside the Tribunal's judgment, stating that it could not be sustained. The Court granted a stay of operation of the judgment for six weeks and directed the urgent supply of certified copies of the order to the parties upon request. The judgment provided a detailed analysis of the interpretation of 'input service' under the Cenvat Rules, emphasizing the limitations on claimable transportation charges and the impact of court judgments and circulars on such interpretations.