2014 (8) TMI 713 - HC - Service Tax

CENVAT Credit - input services - scope of the term include and such as - Whether the Hon ble Tribunal was correct in holding that Credit of Service tax paid on Customs House Agents Services, Shipping Agents and Container Services and Services of Overseas Commission is admissible to the manufacturer as input Service Tax credit , by overlooking the Statutory provision of Rule 2(1) of the Cenvat Credit Rules, 2004 - Held that - Tribunal has taken a stand that where the exports are Free on Board (FOB) basis, the place of removal has to be taken as port and, therefore, services availed by the respondent-assessee till the goods reach the port would be admissible. The manufactured goods since cannot be sold without the assistance of clearing agents, such input service on commission also has been considered necessary and, therefore, any CENVAT credit availed by the petitioner, according to the Tribunal, relating to the clearance of finished goods upto the place of removal, which is the port in the present case, would fall under the criteria and such amount shall be admissible. Clearing and forwarding agent is an agent of the principal. The goods stored by him after clearance from the factory would therefore, be stored on behalf of the principal, and as such the place where such goods are stored by the C & F agent would fall within the purview of sub-clause (iii) of clause (c) of section 4(3) of the Act and as such would be the place of removal. Viewed from that light the services rendered by the C & F agent of clearing the goods from the factory premises, storing the same and delivering the same to the customer would fall within the ambit of rule 2(l) of the Rules as it stood prior to its amendment with effect from 1.4.2008, namely clearance of final products from the place of removal. However, this court is not in agreement with the view adopted by the Tribunal that such services would amount to sales promotion and is, therefore, an input service. For the reasons stated while discussing the issue as regards service commission paid to foreign agent, the services rendered by the C & F agents cannot be said to be in the nature of sales promotion. This issue stands answered accordingly, in favour of the assessee and against the revenue. Considering the role of Customs House Agent and Shipping Agent for rendering Customs House Agent Service and Shipping Agents and Container Services, the decision of this Court referred to in the case of Clearing and Forwarding Agent would apply and the definition of input service would also cover both these services, considering the nature of services rendered by them and the place of removal being the point in this case, the answer shall favour the Revenue. With regard to the commission paid to the overseas agents and service tax paid on the value of commission paid to the overseas agents under the business auxiliary category, under the definition of business auxiliary service which is a taxable service, the services are provided by the Commission Agent. The assessee took CENVAT credit of service tax paid on commission paid to the overseas agents for the goods exported. The eligible category of service for availing the credit is that the service should be used directly or indirectly in the manufacture or clearance of final product, as neither for the purpose of sales promotion, the service of overseas commission agent has been used. - This is required to be answered in favour of the Revenue and against the assessee. Extended period of limitation - Held that - the extended period of limitation would not be available to the Revenue in absence of any material to indicate suppression on the part of the respondent-assessee. It is not in dispute that there was no suppression nor any misrepresentation in respect of CENVAT credit availed by the respondent- assessee in respect of these services. - Decided partly in favor of assessee.

Issues Involved:
1. Admissibility of Cenvat Credit on Service Tax paid for Customs House Agents Services, Shipping Agents and Container Services, and Overseas Commission Services.
2. Definition and scope of "Input Services" under Rule 2(l) of the Cenvat Credit Rules, 2004.
3. Invocation of the extended period of limitation under section 11A of the Central Excise Act, 1944.

Issue-wise Analysis:

1. Admissibility of Cenvat Credit on Service Tax paid for Customs House Agents Services, Shipping Agents and Container Services, and Overseas Commission Services:
The main issue was whether the Cenvat Credit on service tax paid for Customs House Agents Services, Shipping Agents and Container Services, and Overseas Commission Services is admissible. The Tribunal had held that such credit is admissible, considering these services as "input services" under Rule 2(l) of the Cenvat Credit Rules, 2004. The High Court examined whether these services were used directly or indirectly in or in relation to the manufacture of final products or clearance of final products from the place of removal.

2. Definition and Scope of "Input Services" under Rule 2(l) of the Cenvat Credit Rules, 2004:
The definition of "input services" under Rule 2(l) includes any service used by a manufacturer directly or indirectly in or in relation to the manufacture of final products and clearance of final products up to the place of removal. The Court emphasized that the term "input services" should be interpreted broadly, considering the inclusive nature of the definition. The Court referred to various judgments, including Maruti Suzuki Ltd. v. Commissioner of Central Excise, Delhi-III and Ramala Sahkari Chini Mills Ltd. v. Commissioner of Central Excise, Meerut-I, to understand the scope of "input services."

3. Invocation of the Extended Period of Limitation under Section 11A of the Central Excise Act, 1944:
The Revenue invoked the extended period of limitation under section 11A, alleging suppression of facts by the assessee. The Court examined whether the extended period could be justified. The Court noted that the assessee had disclosed the availment of Cenvat credit in the ER-1 returns and that there was no evidence of suppression or misrepresentation by the assessee. Consequently, the extended period of limitation was not applicable.

Detailed Analysis:

Admissibility of Cenvat Credit:
The Court analyzed whether the services in question could be considered "input services." For Customs House Agents Services and Shipping Agents and Container Services, the Court held that these services are used in relation to the clearance of final products up to the place of removal, which in the case of exports is the port. Therefore, the credit on service tax paid for these services is admissible.

Regarding Overseas Commission Services, the Court noted that such services are not directly related to the manufacture or clearance of goods but are more aligned with sales promotion. The Court referred to the decision in Cadila Healthcare Ltd., which held that commission paid to foreign agents does not qualify as "input services." Thus, the credit on service tax paid for Overseas Commission Services was not admissible.

Definition and Scope of "Input Services":
The Court reiterated that the definition of "input services" is broad and inclusive. It includes services used directly or indirectly in or in relation to the manufacture of final products and clearance up to the place of removal. The Court emphasized that the inclusive part of the definition should not restrict the main part, which covers a wide range of services. The Court referred to several judgments to support this interpretation, including the decision in Parth Poly Wooven Pvt. Ltd., which held that outward transportation services are covered under "input services."

Invocation of Extended Period of Limitation:
The Court found that the extended period of limitation under section 11A could not be invoked as there was no evidence of suppression or misrepresentation by the assessee. The assessee had disclosed the availment of Cenvat credit in the ER-1 returns, and the details were available during the audit. Therefore, the extended period was not applicable.

Conclusion:
The High Court held that Cenvat Credit on service tax paid for Customs House Agents Services and Shipping Agents and Container Services is admissible, while the credit on service tax paid for Overseas Commission Services is not admissible. The extended period of limitation under section 11A was not applicable due to the absence of suppression or misrepresentation by the assessee. The appeal was disposed of accordingly, with no order as to costs.

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