2007 (3) TMI 738 - AT - Service Tax

Waiver of Pre-deposit - CENVAT credit - Input services - Services as provided by Customs House Agent/Shipping Agent/Port Service - Commissioner held that services utilized for clearance of final products at the Jetty would not qualify as input services - HELD THAT - The definition of input service fixes the meaning of that expression and such services used by the manufacturer, are required to have a nexus with the manufacture of the final product and clearance of the final product from the place of removal. Place of removal is well defined in Section 4(3)(c) and admits no extension of its meaning to the place of shipping port. The services which are enumerated in the inclusive clause, which applies both, in the context of the provider of output services as well as the manufacture, cannot be read de hors the meaning of input service under Rule 2(l). Therefore, all the activities relating to business, which are input services used by the manufacturer in relation to the manufacture of final product and clearance of the final product from the place of removal alone would be eligible. After the final products are cleared from the place of removal, there will be no scope for subsequent use of service to be treated as input. Prima facie, therefore, services beyond the stage of manufacturing and clearance of the goods from the factory could not be input services. The Commissioner, therefore, does not appear to have committed any error in disallowing the Cenvat credit on this ground. Other items are not pressed at this stage. Thus, we direct that there will be interim stay of the impugned order on the appellant s depositing a further sum of ₹ 25 lakhs (Rupees Twenty-Five lakhs) within six weeks from today, failing which the appeal will stand dismissed. This application is disposed off accordingly.

Summary

Issues:
1. Eligibility of certain services for Cenvat credit under Rule 3 of Cenvat Credit Rules, 2004.
2. Interpretation of the definition of "input services" under Rule 2 of the Cenvat Credit Rules, 2004.
3. Determination of the scope of "place of removal" in the context of Cenvat credit eligibility.

Analysis:
1. The case involved the eligibility of various services, including those of Custom House Agent/Shipping Agent/Port Service, for Cenvat credit under Rule 3 of the Cenvat Credit Rules, 2004. The Department contended that these services did not qualify as input services as defined under Rule 2 of the Rules, as they were utilized beyond the place of removal after the completion of manufacturing activity and clearance of goods. The appellant argued that these services were essential for business operations and should be considered eligible input services.

2. The interpretation of the definition of "input services" under Rule 2 of the Cenvat Credit Rules, 2004 was a crucial aspect of the judgment. The Commissioner analyzed the definition, emphasizing that services used by the manufacturer must have a nexus with the manufacture and clearance of final products from the place of removal. It was clarified that activities beyond the manufacturing and clearance stages would not qualify as input services. The inclusive part of the definition was discussed, highlighting that only activities related to business and used in relation to the manufacture and clearance of final products would be eligible for Cenvat credit.

3. The judgment delved into the determination of the scope of "place of removal" concerning Cenvat credit eligibility. It was established that the services utilized for clearance of final products at a Jetty, which was beyond the place of removal, did not qualify as input services. The Commissioner clarified that the definition of "place of removal" under Section 4(3)(c) of the Central Excise Act, 1944 did not extend to locations like a Jetty, which facilitated loading of goods after clearance from the factory. The decision highlighted the importance of adherence to the defined parameters for Cenvat credit eligibility.

In conclusion, the judgment upheld the Commissioner's findings regarding the disallowance of Cenvat credit for services utilized beyond the place of removal. The appellant was granted an interim stay on the impugned order subject to depositing a specified sum within a stipulated timeframe. The ruling emphasized the necessity of services having a direct nexus with the manufacturing and clearance processes to qualify as eligible input services under the Cenvat Credit Rules.