2007 (8) TMI 501 - AT - Central Excise

Cenvat Credit - Assessee manufactured availed Cenvat credit of the service tax paid on the goods transport services availed by it for the transport of the final products from the place of removal but Commissioner denied the credit - Matter remanded to the larger bench

Summary

Issues Involved:
1. Entitlement to Cenvat Credit on Service Tax paid for outward transportation of final products.
2. Interpretation of "Input Service" under Rule 2(l) of Cenvat Credit Rules, 2004.
3. Conflict between main and inclusive definitions of "Input Service."

Detailed Analysis:

1. Entitlement to Cenvat Credit on Service Tax paid for outward transportation of final products:
The primary issue revolves around whether the services of the goods transport operator for transporting final products from the place of removal can be treated as 'Input Service' under Rule 2(l)(ii) of Cenvat Credit Rules, 2004. The appellants, all cement manufacturing companies, availed Cenvat Credit on the Service Tax paid for these services. The question is whether they are entitled to this credit for the outward transportation from the place of removal to the buyer's premises. The tribunal examined the definition of "Input Services" and its interpretation, considering whether the outward transportation qualifies as an 'Input Service.'

2. Interpretation of "Input Service" under Rule 2(l) of Cenvat Credit Rules, 2004:
The definition of "Input Services" includes services used by a manufacturer directly or indirectly in or in relation to the manufacture of final products and clearance of final products from the place of removal. The tribunal noted that the place of removal could be either the factory or the depot. The interpretation of the definition's two limbs was crucial. The first limb covers services used in clearance from the place of removal, while the second limb includes inward transportation of inputs and outward transportation up to the place of removal. The tribunal emphasized that both limbs should be harmoniously interpreted.

3. Conflict between main and inclusive definitions of "Input Service":
The tribunal found that the Revenue's interpretation, which limits credit to outward transportation up to the place of removal, ignores the first limb of the definition. The tribunal argued for a harmonious interpretation, where outward transportation from the factory to the buyer's destination is considered an 'Input Service' under the first limb. The inclusive definition's mention of outward transportation up to the place of removal does not limit the broader definition provided in the first limb. The tribunal concluded that outward transportation from the factory or depot to the buyer's premises qualifies as an 'Input Service,' entitling the manufacturer to credit.

Conclusion:
The tribunal disagreed with the interpretation in the Gujarat Ambuja case, which limited 'Input Service' to outward transportation up to the place of removal. The tribunal decided to refer the matter to a Larger Bench due to the difference in opinion between coordinate benches. The issue to be resolved is whether services for outward transportation from the place of removal should be treated as 'Input Service,' allowing credit for Service Tax paid on such services, or if it should be limited to outward transportation up to the place of removal as held in the Gujarat Ambuja case. The final order was disposed of by referring the matter to a Larger Bench for resolution.