TaxTMI 
TaxTMI 
2015 (1) TMI 505
X X X X Extracts X X X X
X X X X Extracts X X X X
....and cleaning operations such as deburring and removal of rust developed during transit. As a recipient of service they paid service tax under Business Auxiliary Service under reverse charge and availed credit of the service tax paid. A show cause notice dt. 3.3.2008 was issued to the respondents demanding reversal of service tax credit of Rs. 10,28,524/- on the grounds that the said activities have no nexus to the manufacture of final products and the service activity was rendered outside India, outside the place of removal of excisable goods. The adjudicating authority in his order dt.13.8.2008 confirmed the demand and ordered for recovery of the credit along with interest and dropped penal proceedings. Aggrieved by the order, the respondents filed appeal and Commissioner (Appeals) vide impugned order has set aside the adjudication order and allowed their appeal. Revenue filed the present appeal. 3. The Ld. AR on behalf of the Revenue reiterated the grounds of appeal. He submits that though the respondents paid services tax under reverse charge mechanism, they are not eligible to avail credit. As per the definition of "input services" the activity carried out by the overseas comp....
X X X X Extracts X X X X
X X X X Extracts X X X X
....inclusive definition of "input service". He submits that payment of service tax under reverse charge is not disputed by the department. He submits that the lower appellate authority has discussed the issue in detail and set aside the adjudication order. It is rightly covered within the inclusive definition of "input service'. Department in their grounds of appeal, artificially tried to categorize and interpreted the inclusive definition into four categories whereas the whole definition is to be read together. He submits that none of the activities mentioned in the inclusive definition has any direct relation to the manufacture and clearance of excisable goods. The words used in the definition "such as" confirms that it is only an illustrative example and not restrictive. The activities of removing dust, deburring before delivery is directly related to business. Without this activity, they cannot carry out business. The definition of "input service" provided in Rule 2(l) of CCR 2004 is not integrally connected to manufacture of final product. The activities of post-manufacturing, sales promotion accounting, auditing, financing, computer networking, credit rating, share registry ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... of motor vehicle at the buyer's end. The respondents have carried out the activities of removing the rust developed during transit, deburring of certain machined area of axels and also cross checking of dimensions. I find that they engaged a Overseas service provider to carry out these activities at buyer's premises at USA. As seen from the SCN, and the adjudication order the only ground on which the service tax credit was denied is that services were rendered outside the place of removal of goods from the factory premises which is in the nature of post-removal activities. For the sake of convenience, paragraph 8 of the SCN is reproduced as under :- "8. From the plain reading of the above definition, it appears that the above services rendered by M/sProduct Action International, USA would not qualify as input services and are not eligible for availment of service tax credit. In the instant case, the services are rendered much later after the excisable goods are manufactured and cleared from the place of removal. Further the services are provided after the removal of the goods from the factory premises of t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....val, procurement of inputs, activities relating to business, such as accounting, auditing, financing, recruitment and quality control, coaching and training, computer networking, credit rating, share registry and security, inward transportation of inputs or capital goods and outward transportation upto the place of removal. 10. On careful reading of sub-clause (i) and sub-clause (ii) of the above definition, the sub clause (i) stipulates that input services means any service used by the provider of taxable service for providing output service and sub-clause (ii) stipulates input services used by the manufacture whether directly or indirectly or in relation to the manufacture of final products and clearance of final products and the said definition also provides inclusive definition with illustration of various activities. The department interpreted the definition by dividing into four categories of what is directly relating to manufacture of goods and the activities relating to clearance of goods etc. I find that inclusive part of definition has to be read in totality not in isolation. 11. Revenue relied on Gujarat High Court judgement in the case of CCE Vs Cadila Healthcare Ltd.....
X X X X Extracts X X X X
X X X X Extracts X X X X
....de and observed as follows : 39. The definition of input service which has been reproduced earlier, can be effectively divided into the following five categories, in so far as a manufacturer is concerned : (i) Any service used by the manufacturer, whether directly or indirectly, in or in relation to the manufacturer of final products (ii) Any service used by the manufacturer, whether directly or indirectly, in or in relation to clearance of final products from the place of removal (iii) Services used in relation to setting up, modernization, renovation or repairs of a factory, or an office relating to such factory, (iv) Services used, in relation to advertisement or sales promotion, market research, storage upto the place of removal, procurement of inputs, (v) Services used in rela....