2010 (7) TMI 252 - HC - Service Tax

Appeals dismissed: Cenvat rules limit credit to inputs/capital goods under Rule 3(5); Rule 5 covers input services refund

HC dismissed the appeals, holding that Cenvat rules distinguish 'input' and 'input service' and Rule 3(5) refers only to credit on inputs or capital goods ... Credit of Service tax on removal of excisable goods - Whether the credit of input service availed at the time of receipt of inputs is required to be reversed at the time of clearance of inputs as such when the said service tax credit is in respect of or related to such inputs ? - HELD THAT:- Rule 2(k) of the Rules defines 'input', whereas rule 2(l) defines 'input service', meaning thereby both the terms have been defined independently. Rule 3 defines the term 'Cenvat credit', which includes duty paid under various enactments and also the service tax leviable under section 66 of the Finance Act, 1994. Rule 3(5) of the Rules only talks about the Cenvat credit taken on inputs or capital goods. It does not refer to the Cenvat on input service, whereas rule 5, on which reliance is sought to be placed by the revenue, specifically talks about the Cenvat credit on any input or input service used in the manufacture of final product. This rule pertains to refund in case of exports, which stands altogether on different footings. 'Once the rule-making authority has defined the terms specifically and used the same in different provisions consciously, the argument of learned counsel for the revenue that merely by analogy even if in one provision both the terms have been used, the same should be read in the other provision as well, where it has not been specifically mentioned, has no legs to stand, as the tax cannot be levied merely by inference or presumption'. It is not possible to assume any intention or governing purpose of the statute more than what is stated in the plain language. Words cannot be added or substituted so as to give a particular meaning. Thus, we do not find that any substantial question of law arises in the present set of appeals. Accordingly, the same are dismissed. Issues:1. Whether the credit of input service availed at the time of receipt of inputs is required to be reversed at the time of clearance of inputsRs.2. Interpretation of rule 3(5) and rule 5 of the Cenvat Credit Rules, 2004.3. Applicability of the judgment in Punjab Steels v. CCE.4. Analysis of definitions of 'input' and 'input service' under the Rules.5. Consideration of legal principles in tax statutes interpretation.Analysis:1. The High Court addressed the issue of whether the credit of input service availed at the receipt of inputs must be reversed at the clearance of inputs. The revenue contended that the assessee should reverse the input credit on service tax paid for transportation of goods when the goods are removed from the factory without use. The Tribunal reversed the demand raised by the revenue, relying on the judgment in Chitrakoot Steel & Power Ltd. v. CCE, Chennai, stating that there is no provision in rule 3(5) to reverse the credit of service tax availed on inputs or capital goods at the time of removal. The High Court agreed with the Tribunal's interpretation and dismissed the appeals, finding no substantial question of law.2. The court examined the difference in language between rule 3(5) and rule 5 of the Cenvat Credit Rules, emphasizing that rule 3(5) pertains to reversal of Cenvat credit on inputs or capital goods, while rule 5 addresses Cenvat credit on input or input service. The assessee argued that since there is no provision for reversal of input service credit in rule 3(5), the revenue cannot compel the assessee to reverse such credit. The court analyzed the definitions of 'input' and 'input service' under the Rules to support the assessee's position, highlighting that the terms are defined independently, and rule 5 specifically deals with Cenvat credit on input or input service used in manufacturing final products.3. The judgment in Punjab Steels v. CCE was cited by the Tribunal and relied upon in the present case. The Tribunal's decision in Punjab Steels v. CCE was considered in detail, where it was held that rule 3(5) does not require the reversal of credit of service tax availed on inputs or capital goods when removed from the factory. The High Court concurred with this interpretation, finding it in conformity with the Rules and dismissing the appeals.4. The court further delved into the definitions of 'input' and 'input service' under the Rules to support its conclusion. Rule 2(k) defines 'input' as certain materials, while rule 2(l) defines 'input service' as services availed of. The court emphasized the separate definitions of these terms to underscore that the Rules do not provide for the reversal of credit on input service under rule 3(5), as argued by the revenue.5. Lastly, the court discussed the principles of interpreting taxation statutes, emphasizing that the intention of the legislature must be derived from the plain and unambiguous language of the provisions. Quoting from Mathuram Agrawal v. State of Madhya Pradesh, the court highlighted that the plain language of a statute should convey the subject of the tax, the liable person, and the tax rate clearly and unambiguously. The court concluded that based on the clear language of the Rules, no substantial question of law arose in the appeals, leading to their dismissal.