2018 (2) TMI 117 - SC - Central Excise

CENVAT credit denied for goods transport services beyond manufacturer's premises to customers under Rule 2(l)

Commissioner of Central Excise Service Tax Versus Ultra Tech Cement Ltd.

The SC held that CENVAT credit on goods transport agency services for transporting final products from the manufacturer's premises to customers' premises ... CENVAT Credit - Input services in relation to GTA - transportation of their final product from their premises to customers premises - scope of the restriction 'upto to place of removal' - Rule 2(l)(ii) of the CC Rules, 2004 - validity of CBEC vide its Circular No. 97/8/2007-ST dated August 23, 2007 issued before the amendment for the issues post amendment - definition of ‘input service’ - Held that:- In the first instance, it needs to be kept in mind that Board’s Circular dated August 23, 2007 was issued in clarification of the definition of ‘input service’ as existed on that date i.e. it related to unamended definition. - However, the important aspect of the matter is that Cenvat Credit is permissible in respect of ‘input service’ and the Circular relates to the unamended regime. Therefore, it cannot be applied after amendment in the definition of ‘input service’ which brought about a total change. Now, the definition of ‘place of removal’ and the conditions which are to be satisfied have to be in the context of ‘upto’ the place of removal. It is this amendment which has made the entire difference. That aspect is not dealt with in the said Board’s circular, nor it could be. Secondly, if such a circular is made applicable even in respect of post amendment cases, it would be violative of Rule 2(l) of Rules, 2004 and such a situation cannot be countenanced. The upshot of the aforesaid discussion would be to hold that Cenvat Credit on goods transport agency service availed for transport of goods from place of removal to buyer’s premises was not admissible to the respondent. - Decided in favor of Revenue. Issues Involved:1. Admissibility of Cenvat Credit on Goods Transport Agency (GTA) service for transportation from the place of removal to the buyer's premises.2. Interpretation of 'input service' under Rule 2(l) of the Cenvat Credit Rules, 2004.3. Impact of the 2008 amendment to Rule 2(l) on the admissibility of Cenvat Credit.4. Applicability of the CBEC Circular dated August 23, 2007, post-amendment.Issue-wise Detailed Analysis:1. Admissibility of Cenvat Credit on GTA Service:The core issue revolves around whether Cenvat Credit can be claimed for service tax paid on outward transportation of goods from the factory to the buyer's premises. The respondent availed Cenvat Credit for this service during January 2010 to June 2010. The Revenue argued that transportation from the factory to the customer's premises does not qualify as input service under Rule 2(l) of the Cenvat Credit Rules, 2004.2. Interpretation of 'Input Service' under Rule 2(l):'Input service' is defined under Rule 2(l) of the Rules, 2004, which includes services used directly or indirectly in relation to the manufacture and clearance of final products up to the place of removal. The original definition included services used 'from the place of removal,' but the 2008 amendment changed this to 'up to the place of removal,' significantly altering the scope of admissible services for Cenvat Credit.3. Impact of the 2008 Amendment:The 2008 amendment replaced the word 'from' with 'up to,' limiting the scope of services eligible for Cenvat Credit to those used up to the place of removal. This amendment terminated the eligibility of services used beyond the place of removal, including outward transportation to the buyer's premises. The Supreme Court emphasized that the amendment changed the entire scenario, and the benefit of Cenvat Credit now ends at the place of removal.4. Applicability of the CBEC Circular Dated August 23, 2007:The Commissioner (Appeals) and CESTAT relied on the CBEC Circular dated August 23, 2007, which clarified the definition of 'place of removal' and mentioned three conditions for determining it. However, the Supreme Court clarified that this Circular related to the unamended definition of 'input service.' Post-amendment, the Circular is not applicable as it would violate the amended Rule 2(l). The Supreme Court found the approach of the lower courts untenable for relying on the Circular for post-amendment cases.Conclusion:The Supreme Court concluded that Cenvat Credit on goods transport agency service availed for transport of goods from the place of removal to the buyer's premises is not admissible. The appeal was allowed, setting aside the High Court's judgment and restoring the Order-in-Original dated August 22, 2011, of the Assessing Officer. The Court emphasized that the amended Rule 2(l) must be interpreted to restrict Cenvat Credit to services used up to the place of removal, aligning with the legislative intent of the 2008 amendment.