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TMI Blog2011 (3) TMI 248X X X X Extracts X X X X X X X X Extracts X X X X ..... ntral Excise Tariff Act, 1985. The assessee is having Central Excise Registration No. AAACA3834BXM007. The assessee is availing the cenvat credit as per the provisions of the Cenvat Credit Rules, 2004. They are also paying service tax on the service to transport goods by road in respect of inward transportation as well as outward transportation. They have obtained Service Tax Registration No.AAACA3834BST013 for the same. They are also availing cenvat credit for the service tax paid for the outward transportation of finished goods. The authorities observed that the assessee was paying the service tax on inward transportation of raw materials as well as outward transportation of finished goods and availing credit on the service tax paid on freight amount towards outward transportation. Therefore, a letter was issued by the Range Officer to the assessee calling for information in respect of such credit availed by them. The information was furnished by the assessee. The authorities were of the opinion that the assessee is not entitled to avail the credit of service tax paid on outward transportation of finished goods as the same does not qualify to be an input service in terms of Cenva ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f such outward transportation services also. It is this order of the larger bench, which is challenged in this appeal. 4. The learned Additional Solicitor General of India, assailing the impugned order contended that though the expression 'place of removal' has not been defined in Cenvat Credit Rules, 2004 in terms of sub-rule (t) of Rule 2 of the said rules, if any words or expressions are used in the Cenvat Credit Rules, 2004 and are not defined therein, but are defined in the Central Excise Act, 1994 or the Finance Act, 1944, they shall have the same meaning for the Cenvat Credit Rules as assigned to them in those Acts. The expression "place of removal" is defined under Section 4 of the Central Excise Act, 1944 (for short hereinafter referred to as the 'Act') meaning a factory or any other place or premises of production or manufacturer of excisable goods, a warehouse or any other place or premises wherein the excisable goods have been permitted to be deposited without payment of duty, a depot, premises of a consignment agent or any other place or premises from where the excisable goods are to be sold after their clearance from the factory, from where such goods ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... depot Oil the manufactured goods are delivered to the customer falls within the meaning of 'input service' as defined under the Rules and can the assessee be allowed to take Cenvat credit ? 7. In order to answer this question it is necessary to notice the relevant provisions under the Cenvat Credit Rules, 2004 (prior to its amendment from 1.4.2008), Central Excise Act, 1944 as well as the Finance Act 1994. 8. In exercise of the power conferred by Section 37 of the Central Excise Act 1944 and Section 94 of the Finance Act, 1994 the Central Government have promulgated the Cenvat Credit Rules 2004. It defines 'input', 'input service', 'output service', 'persons liable for paying service tax', 'provider of taxable service', etc., The definitions as they stood before 1.4.2008 are as under :- "Rule 2 (V defines 'input service' means any service (i) used by a provider of taxable service for providing an output service, or (ii) used by the manufacturer, whether directly or indirectly, in or in relation to the manufacture of final products and clearance of final products (from)* the place of removal and includes services used i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 4 Valuation of excisable goods for purposes of charging of duty of excise.(1) Where under this Act the duty of excise is chargeable on any excisable goods with reference to their value, then on each removal of the goods, such value shall - (a) in a case where the goods are sold by the assessee, for delivery at the time and place of the removal, the assessee and the buyer of the goods are not related and the price is the sale consideration for the sale, be the transaction value; (b) in any other case, including the case where the goods are not sold, be the value determined in such manner as may be prescribed. [Explanation.- For the removal of doubts, it is hereby declared that the price-cum-duty of the excisable goods sold by the assessee shall be the price actually paid to him for the goods sold and the money value of the additional consideration, if any, flowing directly or indirectly from the buyer to the assessee in connection with the sale of such goods, and such price-cum-duty, excluding sales tax and other taxes, if any, actually paid, shall be deemed to include the duty payable on the such goods. (2) The provisions of this section shall not apply in respect of any ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e purpose of this section". 16. Therefore though the expression "place of removal" is defined under Section 4(3) of the Central Excise Act, 1944, its application is to be confined as is clear from the opening words of sub-section (3) for the purpose of Section 4 only. 17. Rule 3 of the Cenvat Credit Rules deals with Cenvat credit. It reads as under: "RULE 3. CENVAT credit- (1) A manufacturer or producer of final products or a provider of taxable service shall be allowed to take credit (hereinafter referred to as the CENVAT credit) of- (i) the duty of excise specified in the First Schedule to the Excise Tariff Act leviable under the Excise Act. (ii) xxxxx (iii) xxxxx (xi) xxxxxx xxxxxxxxxxx paid on- (i) any input or capital goods received in the factory or manufacture of final product or premises of the provider of output service on or after the 10th day of September 2004 including the said duties, or tax, or cess paid on any input or input service, as the case may be, used in the manufacture of intermediate products, by a job-worker availing the benefit of exemption specified in the notification of the Government of India in the Minis by of Finance (Department of Reve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has also made the Central Excise Valuation (Determination of Price of Excisable Goods) Rules. 2000. Rule 2(c) of the said Valuation Rules defines the word value as referred to in Section 4 of the Act. Similarly Rule 2(d) makes it clear that words and expressions used in the said rules and not defined but defined in the Act shall have the meanings respectively assigned to them in the Act. 21. Rules 3, 4 and 5 of the Valuation Rules, 2000 are also relevant which read as under: "Rule 3. The value of any excisable goods shall, for the purposes of clause (b) of subsection (1) of section 4 of the Act, be determined in accordance with these rules. Rule 4. The value of the excisable goods shall be based on the value of such goods sold by the assessee for delivery at any other time nearest to the time of the removal of goods under assessment, subject if necessary, to such adjustment on account of the difference in the dates of delivery of such goods and of the excisable goods under assessment as may paper reasonable. Rule 5. Where any excisable goods are sold in the circumstances specified in clause (a) of subsection (1) of Section 4 of the Act except the circumstances in which the exci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce of removal and service used for outward transportation up to the place of removal are to be treated as input service. The first clause does not mention transport service in particular. The second clause restricts transport service credit up to the place of removal When these two clauses are read together, it becomes clear that transport service credit cannot go beyond transport up to the place of removal. The two clauses, one dealing with general provision and another dealing with a specific item, are not to be read disjunctively as to bring about conflict and to defeat the laws scheme. The purpose of interpretation is to find harmony and reconciliation among the various provisions." 25. Therefore, the CESTAT did not accept the arguments of the assessee that any service used by the manufacturer in relation to the clearance of final products from the place of removal is eligible for input service credit. The contention that the transportation of goods from the place of removal to the buyer's premises remains covered by the expression clearance from the place of removal and thus credit is specifically provided for in respect of service tax paid on transport to buyers, did no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ption of uniform products. In that regard reliance has been rightly placed on the judgment of Hon'ble the Supreme Court in the case of Paper Products Ltd. (supra) and such circulars are binding on the department Placing reliance on earlier judgments of the Supreme Court in the cases of CCE v. Usha Martin Industries, 1997 (94) E.L.T.460 (S.C.) = (1997) 7 SCC 47: Ranadey Micronutrients v. CCE, 1996 (87) E.L.T. 19 (S.C.) = (1996) 10 SCC 387; CCE v. Jayant Dalal (P) Ltd., (88) E.L.T. 638 (S.C.) = (1997) 10 SCC 402 and CCE v. Kores (India) Ltd., 1997 (89) E.L.T.441 (S.C.) = (1997) 10 SCC 338. Hon'ble the Supreme Court concluded in para 5 as under. "5. It is clear from the above said pronouncement of this Court that, apart from the fact that the Circulars issued by the Board are binding on the Department, the Department is precluded from challenging the correctness of the said Circulars even on the ground of the same being inconsistent with the statutory provision. The ratio of the judgment of this Court further precludes the right of the Department to file an appeal against the correctness of the binding nature of the Circulars. Therefore, it is clear that so far as the D ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rence to any other limb or category of the definition of input service which is general in nature, is not correct. They further held that the expression "activities relating to business" admittedly covers transportation upto the customers' place and therefore, credit cannot be denied by relying on a specific coverage of outward transportation upto the place of removal in the inclusive clause. The expression "such as" is purely illustrative. The expression means "for example" or "of a kind that". The usage of the words "such as" after the expression "activities relating to business" in the inclusive part of the definition, therefore, further supports their view that the definition of the term "input service" would not be restricted to services specified thereafter. They also noted that the transportation of goods to a customer's premises is an activity relating to business. It is an integral part of the business of a manufacturer to transport and deliver the goods manufactured. If services like advertising, market and research, which are undertaken to attract a customer to buy goods of a manufacturer, are eligible to credit, services which ensure physical availability of goo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he seller bore the risk of loss of or damage to the goods during transit to the destination: and (iii) the freight charges were an integral part of the price of goods. In such cases, the credit of the service tax paid on the transportation up to such place of sale would be admissible if it can be established by the claimant of such credit, that the sale and the transfer of property in goods (in terms of the definition as under Section 2 of the Central Excise Act, 1944 as also in terms of the provisions under the Sale of Goods Act, 1930) occurred at the said place. Therefore, if the service tax is paid on transportation charges, in such cases, it fell within the phrase "clearance of final products from the place of removal" and therefore, the assessee was entitled to CENVAT credit. 30. The definition of 'input service' contains both the word 'means' and 'includes', but not 'means and includes'. The portion of the definition to which the word means applies has to be construed restrictively as it is exhaustive. However, the portion of the definition to which the word includes applies has to be construed liberally as it is extensive. The exhaustive port ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tal goods'. But, while dealing with outward transportation those two words are conspicuously missing. The reason being, after inward transportation of inputs or capital goods into the factory premises, if a final product emerges, that final product has to be transported from the factory premises till the godown before it is removed for being delivered to the customer. Therefore, 'input service' includes not only the inward transportation of inputs or capital goods but also includes outward transportation of the final product upto the place of removal. Therefore, in the later portion of the definition, an outer limit is prescribed for outward transportation, ie.., up to the place of removal. 31. The phrase 'activities relating to business' is an omni-bus one and it finds a place in the inclusive definition. The question is, by a judicial interpretation, outward transportation of the final product from the place of removal till it is delivered to the customer, could be construed as falling within the definition of 'input service'. It is a well settled rule of interpretation that, while interpreting a provision, the Court must take note of not only the exp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion of ours find support from the subsequent conduct on the part of the Central Government, which amended Rule 2(1)(ii). By notification No.10/2008-C.E.(N.T.) dated 1.3.2008, the words 'clearance of final products upto the place of removal' were substituted in the place of the words 'clearance of final products from the place of removal'. The intention of the legislature is thus manifest. Till such amendment, the words 'clearance from the place of removal' included transportation charges from the place of removal till it reached the destination, namely the customer. Therefore, the said input service was included in the early part of the definition 2(1)(ii). Consequently, we cannot read what is expressly provided in the early part of the rule as having been included in the later part of the rule while interpreting the words 'activities relating to business', though it has been amplified by saying it is only an inward transportation of inputs or capital goods and outward transportation upto the place of removal. The phrase "outward transportation upto the place of removal" used in the inclusive portion of the definition (the second part), has to be rea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e dealing with general provision and another dealing with a specific item, are not to be read disjunctively as to bring about conflict and to defeat the laws scheme. The purpose of interpretation is to find harmony and reconciliation among the various provisions'. Giving effect to the said judgment, when the circular was issued by the Board dated 23.8.2007 the circular came up for consideration before the Punjab and Haryana High Court where it was held that when the ownership of the goods and the property remain with the seller of the goods till the delivery of goods in acceptable condition to the purchaser at his door step, the freight charges incurred by the manufacturer for such sale and supply at the door step of the customer are subjected to service tax and therefore, it falls within the definition of 'input service'. However, the Larger Bench of the CESTAT following the aforesaid judgment held the expression 'activities relating to business' covers transportation upto the customers' place and it is an integral part of the manufacturing business and therefore, credit cannot be denied by relying on a specific coverage of outward transportation upto the p ..... X X X X Extracts X X X X X X X X Extracts X X X X
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