2009 (5) TMI 48 - AT - Service Tax

Cenvat Credit on Input Services GTA service - services availed by a manufacturer for outward transportation of final products from the place of removal be treated as an input service in terms of Rule 2(1)(ii) of the CENVAT Credit Rules, 2004 and thereby enabling the manufacturer to take credit of the service tax paid on the value of such services cenvat credit on outward transportation allowable.

Summary

Issues Involved:
1. Definition and interpretation of "Input Service" under Rule 2(1)(ii) of the CENVAT Credit Rules, 2004.
2. Eligibility of CENVAT credit for outward transportation services from the place of removal.
3. Applicability of legal precedents and principles to the interpretation of "Input Service".

Issue-wise Detailed Analysis:

1. Definition and Interpretation of "Input Service":
The core issue was whether services availed by a manufacturer for outward transportation of final products from the place of removal should be treated as an "Input Service" under Rule 2(1)(ii) of the CENVAT Credit Rules, 2004. The definition of "input service" includes services used directly or indirectly in the manufacture and clearance of final products from the place of removal and encompasses a broad range of activities related to business.

2. Eligibility of CENVAT Credit for Outward Transportation Services:
The tribunal analyzed whether outward transportation qualifies as an "input service". The inclusive definition of "input service" covers activities relating to business, including transportation up to the place of removal. The tribunal emphasized that transportation to the customer's premises is integral to business operations and should be eligible for credit. The tribunal referenced several legal precedents to support this interpretation, emphasizing that the term "activities relating to business" is broad and includes outward transportation.

3. Applicability of Legal Precedents and Principles:
The tribunal cited multiple Supreme Court decisions to argue that each limb of the definition of "input service" is independent and providing credit under one does not negate eligibility under another. They referenced the Kerala State Co-operative Marketing Federation Ltd. case, which established that different heads of exemption should be treated distinctly. The tribunal also cited Share Medical Care v. Union of India, emphasizing that benefits under different notifications or heads can be claimed if the conditions are met. The tribunal further referred to the HCL Ltd. case, where the Supreme Court allowed the benefit of a more favorable exemption notification.

The tribunal rejected the Revenue's argument that credit for outward transportation cannot be allowed based on a specific clause in the definition, citing the principle that the word "include" is generally used to enlarge the meaning of preceding words. They referenced the Apex Court's decision in Regional Director v. High Land Coffee Works and the Larger Bench of the Tribunal in Commissioner of Central Excise v. GTC Industries Ltd., which supported a broader interpretation of inclusive definitions.

The tribunal concluded that the definition of "input service" should be interpreted in light of business requirements and not restrictively. They held that services availed for outward transportation from the place of removal are indeed "input services" under Rule 2(1)(ii) of the CENVAT Credit Rules, 2004, thereby enabling manufacturers to take credit for the service tax paid on such services.

Conclusion:
The tribunal answered the reference by affirming that outward transportation services from the place of removal qualify as "input services" under the CENVAT Credit Rules, 2004, allowing manufacturers to claim CENVAT credit for the service tax paid on these services. The case was returned to the referring Bench for further orders.