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TMI Blog2015 (11) TMI 167X X X X Extracts X X X X X X X X Extracts X X X X ..... ed by a manufacturer of final products as a consignor/consignee for which he is made the person liable for paying service tax under Section 68 (2) of the Finance Act, 1994, can be deemed in terms of the Explanation to Rule 2 (p) of Cenvat Credit Rules, 2004, as an 'output service' provided by him when the said Explanation specifically excludes from its scope a person liable for paying service tax if he manufactures final products? ii) Whether the credit taken by such manufacturer on the input service used in the final products could be utilised for discharging service tax liability as a person liable for paying service tax in relation to the said Goods Transport Agency service received by them on claiming the GTA service as an output service in terms of the above Explanation to Rule 2 (p) of Cenvat Credit Rules, 2004? 2. The facts, in a nutshell, are as hereunder :- The respondent/assessee is a manufacturer of monobloc pumps falling under Tariff Item No.8413.7010 of the schedule to the Central Excise Tariff Act, 1985. The assessee is registered with the Central Excise Department. As a manufacturer of excisable goods, the respondent/assessee availed credit of du ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CCE - Vs - ABB Ltd., Bangalore - 2011 (44) VST 1 : on an identical issue, and answered the issue in favour of the assessee. For better clarity, the relevant portion of the order is quoted hereinbelow :- 11. With regard to the outward freight charges, the Karnataka High Court in the case of CCE V. ABB Ltd., Bangalore reported in [2011] 44 VST 1, which was rendered on the appeal filed by the Department as against the decision of the full Bench of the Tribunal, while answering the issue whether the services availed by a manufacturer for outward transportation of final products from the place of removal should 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 on the value of such services, held as follows: 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 libe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... used the words 'inputs' or 'capital 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, the final product has to be transported from the factory premises toll 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, i.e. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce was entirely unnecessary. This interpretation of ours find support from the subsequent conduct on the part of the Central Government, which amended Rule 2 (i)(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(i)(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 port ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the place of removal. The two clauses, one dealing with general provision and another dealing with a specific item, are not be read disjunctively as to bring about conflict and it 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 cove ..... X X X X Extracts X X X X X X X X Extracts X X X X
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