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TMI Blog2017 (11) TMI 1408X X X X Extracts X X X X X X X X Extracts X X X X ..... egarding Rent a Cab Service, reliance placed in the decision in the case of The Commissioner of Central Excise Service Tax Bengaluru-IV, Versus Ultra Tech Cement Ltd. [2016 (7) TMI 1080 - KARNATAKA HIGH COURT], where it was held that credit is allowed. Regarding Club and association services, it is clear that it is club activities for going for a sale or any other assigned work. It will be operational, manufacturing activity. The credit on all services allowed - appeal dismissed - decided against Revenue. - D. B. Central/Excise Appeal No. 16 / 2016 - - - Dated:- 4-10-2017 - K. S. Jhaveri And Vijay Kumar Vyas, JJ. For the Appellant : Mr. Anurag Kalavatia For the Respondent : Mr. Dev Nath JUDGMENT 1. By way of this appeal the appellant has assailed the judgment and order of the Tribunal whereby the Tribunal has allowed the appeal of the assessee. 2. Counsel for respondent contended that the issue is now squarely covered by the decision of this Court in Excise Appeal No.22/2017 decided on 24.08.2017, which reads as under:- 1. The appeals which are not admitted are admitted on following substantial questions of law: Appeal NO. 22/2017 1. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of decisions which are rendered by the Supreme Court where the issue is pending from judgments of different High Courts wherein the first issue is of outdoor catering where in a case of Commissioner vs. Ultratech Cement Ltd. 2014 (36) STR J70 (S.C.) wherein it has been held as under:- The Bombay High Court in its impugned order had held that the ratio of Supreme Court ruling in Maruti Suzuki case (2009) 240 ELT 641 (SC), in the context of input is applicable for interpretation of expression activities relating to business in definition of input service. Providing canteen service to the workers is mandatory to assessee who is engaged in business of manufacture of cement failure entails penal consequences. Outdoor catering services were engaged in order to comply with Factories Act, 1948. Use of outdoor caterer s services has nexus or integral connection with the manufacture of final product in this case. Credit of Service Tax paid on outdoor catering services is admissible. Credit not admissible to manufacturer on part of Service Tax borne by worker and affidavit was filed by assessee on reversal of proportionate credit and embedded in the cost of food recover from employe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eld as under:- 9. Applying the ratio laid down by the Hon'ble Apex Court in the case of Maruti Suzuki Limited v. Commissioner of Central Excise, Delhi (Supra), we hold that unless the nexus is established between the services rendered and the business carried on by the assessee, the benefit of CENVAT credit is not allowable. In the present case, in our opinion, rendering taxable services at the residential colony established by the assessee for the benefit of the employees, is not an activity integrally connected with the business of the assessee and therefore, the Tribunal was not justified in holding that the services such as repairs, maintenance and civil construction rendered at the residential colony constitutes 'input service' so as to claim credit of service tax paid on such services under Rule 2(l) of the CENVAT Credit Rules, 2004. 5.2 He contended that services which are given outside the factory premises will not be governed under Rule 2(l) of the Cenvat Credit Rules 2004 which reads as under: 2(l) input service means- (i) services provided or agreed to be provided by a person located in non-taxable territory to a person located in non- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... services, cosmetic and plastic surgery, membership of a club, health and fitness centre, life insurance, health insurance and travel benefits extended to employees on vacation such as Leave or Home Travel Concession, when such services are used primarily for personal use or consumption of any employee; 5.6 Mr. Ranka has also contended in view of following services which reads as under:- 6.1 That the ld. CESTAT has confirmed disallowance of the CENVAT Credit amounting to ₹ 18,134/- in respect of following services: (a) outdoor catering in guest house of ₹ 17,002/- (b) pandal shamiana service of ₹ 226/- and (c) Telephone service of ₹ 906/- 6.2 That the ld. CESTAT has allowed CENVAT Credit amounting to ₹ 36,48,667/- in respect of remaining services namely: (a) outdoor catering of factory canteen of ₹ 18,793/- (b) Clearing Forwarding (C F) Agent of Depot of ₹ 9,74,561/- (c) Cargo Handling Service of Depot of ₹ 1,12,336/- (d) Business Auxiliary Service of Depot of ₹ 1,83,036/- (e) GTA (outward transportation of cement) of ₹ 25,39,941/-. 5.7 He has also contended t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... department. The nature of input service were not known to the department and assessee has not ensured to take correct credit on the basis of provisions of Cenvat Credit Rules. The irregular availment of the Cenvat Credit resulting of short payment of Central Excise duty, therefore, the appellant is liable to penal action under Section 11AC of Central Excise Act, 1944 read with Rule 15 of Cenvat Credit Rules, 2004. The appellant is also liable to penal action under Rule 25 of Central Excise Rules, 2002 and Interest upon the confirmed demand is also recoverable under Rule 15 of Cenvat Credit Rules, 2002/2004 and under Section 11AB of the Central Excise Act, 1944. Shri Vinay Kumar jain, Manager of the appellant has pleaded that penalty has been imposed on them without stating any specific reason except involvement in the deliberate to suppression of facts and irregular availment of Credit. I find that he was looking after the work relating to credit of service tax and responsible for dealing with work. He is liable for panel action. All points raised by the appellant are well discussed by the adjudicating authority in inpugned arder and I agree with the same. 5.8 He contended th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e finding, 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 , is erroneous in any event because even the Circular issued by the Board on 23rd August, 2007 does not provide for the allowance as widely as indicated in the judgment of the Karnataka High Court quoted above. The Board in its Circular has made the relaxation in some cases having the factual background as indicated therein. On that basis it cannot be said that because in some cases the outward transportation charges or the service tax payable thereon is claimable as input service, in all cases such benefit may be available. 13. By the amendment made with effect from 1st April, 2008 substituting the word from by the word upto all that has been done is to clarify the issue. Neither the services rendered to the customer for the purpose of delivering the goods at the destination was covered by the definition of input service prior to 1st April, 2008, nor is the same covered after 1st April, 2008. If the definition provided in section 2 is read as a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ctive from 1-4-2008 notwithstanding the clarification issued by the Central Government by way of their circular, transportation charges incurred by the manufacturer for 'clearance of final products from the place of removal' was included in the definition of input service. By the amendment made with effect from 1st April, 2008 substituting the word from by the word upto all that has been done is to clarify the issue. Neither the services rendered to the customer for the purpose of delivering the goods at the destination was covered by the definition of input service prior to 1st April, 2008, nor is the same covered after 1st April, 2008. If the definition provided in section 2(1)(ii) is read as a whole, it would appear that outward transportation charges or taxes paid in regard thereto is claimable only with regard to those transports which were made from one place of removal to another place of removal. 6. Considering that the Tribunal has merely disposed of the matter following the judgment in the case of ABB Ltd. (supra), the order under challenge is set aside. The matter is remanded to the Tribunal for re-hearing on merits. 6. He contended that the vi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be, also does not appeal admissible as the credit taken for transportation beyond the place of removal can not be categorized as input service up to the place of removal in terms of Cenvat credit rules. Hence Cenvat credit taken on services tax paid on services utilized Factory to consumer Depot to consumer does not appear to be admissible. I observe that inpugned credit is availed against GTA services received for outward transportation of finished goods from factory to the premises of buyers and from depots to the premises of buyers. Assessee heavily placed reliance to CBEC master Circular No.97/8/2007 dated 23.8.2007. In para 8.2 of said circular and it has been clarified that: That for a manufacturer/consignor, the eligibility to avail credit of the service tax paid on the transportation during removal of excisable goods would depend upon the place of removal as per the definition. In case of a factory rate sale, sale from a non-duty paid warehouse, or from a duty paid depot (from where the excisable goods are sold, after their clearance from the factory), the determination of the 'place of removal' does not pose much problem. However, there may be situations wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d by the assessee. However, it is not correct to say that cement is assessed under Section 4A on MRP basis. The notification applicable for central excise duty on cement has been so framed so as to charge central excise duty with reference to RSP slabs under section 4 itself, without any abatement as in case of Section 4 A ibid. Therefore the claim of the assessee that in case of MRP based assessment, central excise duty on freight element is paid automatically devoid of the merit. Therefore even in case of so called MRP based goods their claim that they have also paid central excise duty on freight element has not been substantiated with any documentary evidence. In such a situation it is not established that they have paid central excis duty on freight element by including cost of freight in the assessable value in respect of all goods. In view of the facts, all the conditions stipulated under CBEC's said circular have not been satisfied and the credit of service tax paid on outward GTA up to customer's place can not be allowed to the assessee. Thus, I hold that Cenvat credit amounting to ₹ 48,18,868/- availed in respect of GTA Service for outward transportation of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ale from a non-duty paid warehouse, or from a duty paid depot (from where the excisable goods are sold, after their clearance from the factory), the determination of the 'place of removal' does not pose much problem. However, there may be situations where the manufacturer/consignor may claim that the sale has taken place at the destination point because in terms of the sale contract/agreement (i) the ownership of goods and the property in the goods remained with the seller of the goods till the delivery of the goods in acceptable condition to the purchaser at his door step; (ii) the 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. 16.6 I further find that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... included as the sale in the present facts took place at the buyer's premises is incorrect. Further, for the period 1.7.2000 to 31.3.2003 there will be no extended place of removal, the factory premises or the warehouse (in the circumstances mentioned in the Section), alone being places of removal. Under no circumstances can the buyer's premises, therefore, be the place of removal for the purpose of Section 4 on the facts of the present case. 7. Mr. Jain appearing in Appeal No. 44/2015 has taken us to the finding arrived at by the Tribunal 3. Auction and club and association services. The Cenvat credit has been taken on service of auction for the sale of waste and scrap arising during the course of manufacturing. To deny the Cenvat credit, learned AR relied on the decision of Sundaram Clayton Ltd. Vs. CCE, Chennai (Supra). In that case, I find that it was only the stay application where the Bench was of the view that on such services, the appellant is not entitled to take Cenvat Credit. Therefore to dispense with the condition of pre-deposit, the matter was considered. But there is no final order on that service Further, I find that the sale of waste and scrap whi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o the joint ventures, vendors or gives it to the grid for distribution? In the case of Collector of Central Excise v. Rajasthan State Chemical Works reported in 1991 (55) ELT 444 (SC) the test laid down by this Court is whether the process and the use are integrally connected. As stated above, electricity generation is more of a process having its own economics. Applying the said test, we hold that when the electricity generation is a captive arrangement and the requirement is for carrying out the manufacturing activity, the electricity generation also forms part of the manufacturing activity and the input used in that electricity generation is an input used in the manufacture of final product. However, to the extent the excess electricity is cleared to the grid for distribution or to the joint ventures, vendors, and that too for a price (sale) the process and the use test fails. In such a case, the nexus between the process and the use gets disconnected. In such a case, it cannot be said that electricity generated is used in or in relation to the manufacture of final product, within the factory . Therefore, to the extent of the clearance of excess electricity outside the fa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tward transportation upto the place of removal; but excludes services,- (A) Specified in sub-clauses (p), (zn), (zzl), (zzm), (zzq), (zzzh) and (zzzza) of clause (105) of section 65 of the Finance Act (hereinafter referred as specified services), in so far as they are used for- (a) construction of a building or a civil structure or a part thereof; or (b) laying of foundation or making of structures for support of capital goods, except for the provision of one or more of the specified services; or (B) specified in sub-clauses (d), (o), (zo) and (zzzzj) off clause (105) of section 65 of the Finance Act, in so far as they relate to a motor vehicle except when used for the provision of taxable services for which the credit on motor vehicle is available as capital goods; or (C) such as those provided in relation to outdoor catering, beauty treatment, health services, cosmetic and plastic surgery, membership of a club, health and fitness centre, life insurance, health insurance and travel benefits extended to employees on vacation such as Leave or Home Travel Concession, when such services are used primarily for personal use or consumption of any employee. P ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 1.3.2008 by replacing the words 'outward transportation from the place of removal' with the owrds outward transportation upto the place of removal and by virtue of the said amendment, input service has been restricted upto to place of removal and the Board's circular No. 97/8/2007 dated 23.08.2007 which was used in context of earlier definition can not be applied in view of change in the legal position. As regards argument that the activities relating to business also includes outward transportation upto to customer's premise, I find that in the said definition, the various activities relating to business have been listed therein and the same specifically refers to outward transportation upto the place of removal only and the definition of 'input service' and thus, their plea is not tenable. 5.4.2 It has been argued that they had not claimed any deduction towards freight in price of Cement inspite of FOR destination price for payment of duty; and that the availment of credit and valuation for payment of duty are tow independent issues and cannot be mixed. They also placed reliance on case laws in their favour. I find that the duty on Cement was specif ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0201 ITR 477, held as under: It may be that the assessee may maintain a canteen for providing facilities for tea or tiffin, lunch or refreshment to the employees who are engaged in such establishment, but that does not made the canteen industrial undertaking in the manufacture or production of any article or thing..... The canteen which is run by the assessee company cannot be said to be for the purpose of the business of the assessee producing articles or things. The assessee is engaged in the manufacture of electronic goods and equipments and by no stretch of imagination can it be said that running of the canteen for its employees is for the purpose connected with the assessee's business of manufacture and production electronic articles and equipments. Even if a factory has to maintain a canteen, it cannot be said that it is an integral part of manufacture or production carried on by the assessee . 5.5.2 Further, while deciding the question as to whether the proceeds to sales made in the canteen run by the particular assessee for the benefit of the its employees on a non-profit basis form part of the taxable turnover of the assessee, the Hon'ble Delhi Hing Cou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ested or accrued right could be taken away with retrospective effect. Further on a conjoint reading of all the notifications it is clearly established that the intention of the Government all along was to excluse the appellants from getting the benefit of the MODVAT credit, therefore, the contentions that the Finance Act violates the vested right is without any basis. The various decisions referred to and relied upon by the counsel appearing for the appellant in support of his contention that the vested right created in their favour could not have been divested by the respondent retrospectively is found to be based on misreading of the language of the aforesaid notifications which do not support, but in fact destroy the very basis of the case of the appellants. In view of the changed legal position, the case laws quoted by them in their favour are not going to help them. Thus, I hold that the outdoor catering service do not fall under the definition of input service as provided under Rule2(1) of the Cenvat Credit Rules, 2004 and credit amounting to ₹ 862/- availed by the assessee on this service is not admissible to them. 7.3 On the other hand counsel for the respo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntral Excise Act. Duty or service tax is payable both on goods which are manufactured or produced and services which are rendered or provided. Therefore it is necessary to define Input and Input Service. Input refers to goods and only Excise duty is payable thereon, whereas Input service applies to service on which service tax is payable. The Valuation Rules makes it clear, read with Section 4 and the definition of place of removal , that the transportation charges upto the place of removal is taken into consideration for valuation for levying excise duty, thus excluding the transportation charges from the place of removal to the place of delivery. Input service per se is not confined to pre-manufacturing stage. It also refers to post manufacturing stage. As is clear from the Circular issued by the Board on 23-8-2007, where a manufacture/consignor may claim that the sale has taken place at the destination point because in terms of sale contract/agreement (i) the ownership of goods and the property in the goods remained with the seller of the goods till the delivery of the goods in acceptable condition to the purchaser at his door step (ii) the seller bore the risk of loss of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... services rendered by the manufacturer are included in the definition of 'input service'. However, as the legislature has chosen to use the word 'means' in this portion of the definition, it has to be construed strictly and in a restrictive manner. After defining the 'input service' used by the manufacturer in a restrictive manner, in the later portion of the definition, the legislature has used the word 'includes'. Therefore, the later portion of the definition has to be construed liberally. Specifically what are the services which fall within the definition of 'input service' has been clearly set out in that portion of the definition. Thereafter, the words 'activities relating to business' - an omni-bus phrase is used to expand the meaning of the word 'input service'. However, after using the omni-bus phrase, examples are given. It also includes transportation. The words used are (a) inward transportation of inputs or capital goods (b) outward transportation upto the place of removal. While dealing with inward transportation, they have specifically used the words 'inputs' or 'capital goods'. But, while dealin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... irst part of the definition portion of the CENVAT Rules which refers to 'clearance of final products from the place of removal' and in the second part (inclusive) of the definition when the phrase used is 'activities relating to business such as', merely because in that portion of the definition either transportation charges is not included or service rendered for clearance of final products is not included, it is impermissible to read those words as in the earlier portion of the definition, it is specifically provided for. It is a well known rule of interpretation that when the statute uses words and phrases in a particular section, meaning has to be given in each of those sections. When the statute provides specifically for a particular contingency, it is to be so interpreted and after so interpreting, it cannot be said in another portion where general words are used, it also includes what is specifically provided. Therefore, the finding recorded by the CESTAT that the phrase and expression 'activities relating to business' admittedly covers transportation upto the customer's place was entirely unnecessary. This interpretation of ours find support from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 'activities relating to business' as including clearance of final products 'from the place of removal' which occurred already in the first part of Rule 2(l)(ii) prior to 1-4-2008, runs counter to the language employed in the second part of the definition of 'input service' and is to that extent contrary to the legislative intention and therefore, the said finding is unsustainable in law (ii) In Ambuja Cements Ltd. vs. UOI 2009 (236) ELT 436 (P H), it has been held as under:- 7. Having heard learned Counsel at a considerable length and perusing the paper book and statutes with their able assistance, we are of the view that the questions of law deserve to be answered in favour of the assessee-appellant and against the revenue. It is undisputed that the appellant being a manufacturer and consigner has paid service tax on the value of goods transported by it by road. The Central Board of Excise and Customs (CBEC) has issued a circular dated 23.8.2007 dealing with the issue concerning 'up to what stage manufacturer/consigner could take credit on the service tax paid on goods transported by it by road'. The issue, in fact, has emerged out of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act, 1944 as also in terms of the provisions under the Sale of Goods Act, 1930) occurred at the said place. 9. It is well settled that the circulars issued by the Board are binding and aims at adoption 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 MANU/SC/0960/1997 : 1997ECR257(SC) ; Ranadey Micronutrients v. CCE MANU/SC/0025/1997 : 1996(87)ELT19(SC) ; CCE v. Jayant Dalal (P) Ltd. MANU/SC/1535/1997 : 1996(88)ELT638(SC) ; and CCE v. Kores (India) Ltd. MANU/SC/1510/1997 : 1997(89)ELT441(SC) , Hon'ble the Supreme Court concluded in para 5 as under: 5. It is clear from the abovesaid pronouncements 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 f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the place of removal; 12. The 'input service' has been defined to mean any service used by the manufacturer whether directly or indirectly and also includes, inter alia, services used in relation to inward transportation of inputs or export goods and outward transportation up to the place of removal. It has also remain un-controverted that for transportation purposes insurance cover has also been taken by the appellant which further shows that the ownership of the goods and the property in the goods has not been transferred to the seller till the delivery of the goods in acceptable condition to the purchaser at his door step. Accordingly, even the second condition that the seller has to bear the risk of loss or damage to the goods during transit to the destination stand fulfilled. 13. The third condition that the freight charges were integral part of the excisable goods also stand fulfilled as the delivery of the goods is FOR destination' price. This aspect has been specifically pointed out in para 2.2 of the reply dated 12.4.2006 given to the show cause notice. Therefore, we are of the view that the first question is liable to be answered in favour of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e later part of the definition would permit us to exclude such a service form the sweep of the definition. Secondly, we notice that the definition of the term 'input service' came to be amended with effect from 1-4-2008 and instead of words clearance of final products from the place of removal , the words clearance of final products up to the place of removal came to be substituted. What would be the position if the case had arisen after 1-4-2008 is a situation we are not confronted with. We, therefore, refrain from making any observations in this regard. We, however, cannot help noticing the change in the statutory provisions which is at the heart of the entire controversy. In so far as the cases on hand are concerned, the statutory provisions cover the service used by the manufacturer in relation to the manufacture of the final products or even the clearance of final products from the place of removal. 21. We must, however, for our curiosity reconcile the expression from the place of removal occurring in the earlier part of the definition with words 'up to the place of removal' used in inclusive part of the definition. Counsel for the assessees submitted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ellant, in the present case, sale of cement was made at the destination of the buyer and hence the appellant would be entitled to CENVAT credit on input service on transportation of the cement sold by the appellant- assessee. Initially, the period in dispute was from August-2006 to October-2007 and from November-2007 to July-2008. In view of the change in definition of input service provided in Rule 2(1) of the CENVAT Credit Rules, 2004 w.e.f. 1.4.2008 although the assessing authority as well as the first appellate authority had denied the benefit to the appellant for the entire period but the Tribunal granted the benefit of CENVAT credit to the appellant-asses see for the period upto 31.03.2008 but has denied the same from 01.04.2008 to 31.07.2008, which is the relevant period in question in this appeal. 6. The specific case of the appellant- assessee is that the sale of cement was completed only after delivery was made to the buyer. Invoices were produced and filed before the assessing officer, copies of which have also been placed before us for our perusal. In the said invoice, the price of cement has been calculated keeping in view that the same was to be delivered at the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lar, the place of removal has to be ascertained in terms of Central Excise Act, 1944 read with the provisions of the Sale of Goods Act, 1930 which has been dealt with in detail in the said Circular. According to the provisions of the Sale of Goods Act, 1930, the intention of the parties as to the time when the property in goods has to pass to the buyer is of material consideration. The record clearly shows that the intention of the parties was that the sale would be complete only after goods are delivered by the seller at the address of the buyer. The assessing officer as well as the appellate authority have held that the assessee would not be entitled to the benefit merely because no documentary evidence has been adduced to establish the fact of insurance coverage by the assessee. In our view, who pays for insurance or bears the risk of goods in transit would not be a material consideration. The same has also been made clear by the Central Board of Excise and Customs, Department of Revenue, Ministry of Finance, in its Circular dated 20.10.2014. Outdoor Catering (i) In CCE vs. Ultratech Cement Ltd. (2010) 29 STT 244 (Bom), it has been held as under:-. 28. In the pres ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h contingency the Legislature has incorporated the inclusive part after the substantive part qualified by the place of use. For example, one of the categories mentioned in the inclusive part is used as packing material . Packing material by itself would not suffice till it is proved that the item is used in the course of manufacture of final product. Mere fact that the item is a packing material whose value is included in the assessable value of final product will not entitle the manufacturer to take credit. Oils and lubricants mentioned in the definition are required for smooth running of machines, hence they are included as they are used in relation to manufacture of the final product. The intention of the Legislature is that inputs falling in the inclusive part must have nexus with the manufacture of the final product. 16. In our earlier discussion, we have referred to two considerations as irrelevant, namely, use of input in the manufacturing process, be it direct or indirect as also absence of the input in the final product on account of the use of the expression used in or in relation to the manufacture of final product . Similarly, we are of the view that consideratio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... put service extends to services used prior to/during the course of/after the manufacture of the final products. The fact that the definition of 'input service' is wider than the definition of 'input' would make no difference in applying the ratio laid down in the case of Maruti Suzuki Ltd. (supra) while interpreting the scope of 'input service'. Accordingly, in the light of the judgment of the Apex Court in the case of Maruti Suzuki Ltd. (supra), we hold that the services having nexus or integral connection with the manufacture of final products as well as the business of manufacture of final product would qualify to be input service under Rule 2(1) of 2004 Rules. 32. As rightly contended by Shri Shridharan, learned Counsel for the respondent-assessee, in the present case, the assessee carrying on the business of manufacturing cement by employing more than 250 workers is mandatorily required under the provisions of the Factories Act, 1948 to provide canteen facilities to the workers. Failure to do so entails penal consequences under the Factories Act, 1948. To comply with the above statutory provision, the assessee had engaged the services of a outdoor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s would be allowable. 35. The argument of the Revenue, that the expression such as in the definition of input service is exhaustive and is restricted to the services named therein, is also devoid of any merit, because, the substantive part of the definition of 'input service' as well as the inclusive part of the definition of 'input service' purport to cover not only services used prior to the manufacture of final products, subsequent to the manufacture of final products but also services relating to the business such as accounting, auditing...etc. Thus the definition of input service seeks to cover every conceivable service used in the business of manufacturing the final products. Moreover, the categories of services enumerated after the expression 'such as' in the definition of 'input service' do not relate to any particular class or category of services, but refer to variety of services used in the business of manufacturing the final products. There is nothing in the definition of 'input service' to suggest that the Legislature intended to define that expression restrictively. Therefore, in the absence of any intention of the Legisl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se two tests is satisfied, then such a service falls within the definition of input service and the manufacturer is eligible to avail Cenvat credit of the service tax paid on such service. CANTEEN SERVICE 10. It is in this context that when the assessee provides outdoor canteen facilities because of a statutory obligation imposed on him under Section 46 of the Factories Act it becomes a condition of service as far as the employees are concerned. He has paid the service tax on outdoor canteen services. The said expenses incurred by the assessee will also be taken into consideration before fixing the price of the final product. It may be a welfare measure but certainly it is not a charity provided by the employer to the employees. It is an onerous legal obligation imposed on him. 11 and 12* .. 13. Therefore, merely because these services are not expressly mentioned in the definition of input service it cannot be said that they do not constitute input service and the assessee is not entitled to the benefit of CENVAT credit. In fact, Rule 3 of the Cenvat Rules, 2004, specifically provides that the manufacturer of final products shall be allowed to take credit. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oods, to provide the same if he desires to run his factory. In view of the definition of Input service which means any service used by the manufacturer, whether directly or indirectly, in or in relation to the manufacture of final products, the input service does not have to used directly in the manufacture of final products, it may be a service which is only indirectly used in relation to the manufacture of final products. In the circumstances, canteen services which are indispensable in relation to manufacture of the final products would certainly fall within the ambit of input service as defined under the Rules. 7. Moreover, Rule 3 of the Rules insofar as the same is relevant for the present purpose provides that the manufacturer shall be allowed to take credit of the service tax leviable under Section 66 of the Finance Act; paid on any input service received by the manufacturer of final product on or after the 10th day of September, 2004. A plain reading of the said rule makes it clear that the said provision does not qualify the nature of input service availed of by the manufacturer. 8. In the above factual and legal background, the Tribunal was justified in hold ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... st clearance activity is not in relation to the manufacture of final product and, therefore, not an input service. The assessee was, therefore, not eligible to avail of CENVAT credit on the service tax paid towards Commission paid to C F agents. (i) The Tribunal was of the view that C F agents have a definite role to play in promotion of sales by storing goods and supplying the same to customers. Thus, he is actually promoting sales. (ii) The learned counsel for the appellant submitted that the service rendered by the C F agents is also related to sales. It is used after the manufacturing activity is over and after clearance of the final products, that is, after the place of removal, therefore, it does not fall in the main part of the definition of input service and is also not in relation to any of the activities specified in the inclusive part of the definition. It was further submitted that the services rendered by C F agents can in no manner said to be sales promotion so as to fall within the ambit of the expression input service. On the other hand the learned counsel for the assessee submitted that the respondent appointed C F agents in different States for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... warehouse or any other place or premises wherein the excisable goods have been permitted to be deposited without payment of duty; (iii) 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 are removed. (vi) Thus, the 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(1) 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 pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ave rightly held that tax paid by the service providers under this category of cargo handling service, therefore, would be inclusive in the definition of 'input service'. There is no dispute on the part of the Revenue that such services were availed by the respondents in clearing the goods from the factory premises and for the purpose of export. Accordingly, Tax Appeal is dismissed. Rent a Cab Services (i) In CCE vs. Stanzen Toyotetsu India Pvt. Ltd. (2011) 32 STT 244 (Kar), it has been held as under:- 13. Rent a Cab Service is provided by the assessee to these workers to reach the factory premises in-time which has a direct bearing on the manufacturing activity. In fact the employee is also entitled to conveyance allowance. It also would form part of a condition of service and the amounts spent on the conveyance of the employees is also a factor which will be taken into consideration by the employees in fixing the price of the final product. By no stretch of imagination can it be construed as a welfare measure. It is a basic necessity. To ensure that the work force comes on time at the work place, the employers have taken this measure which has a direct bea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... procuring raw materials/ consumables / inputs/ capital goods for the manufacturing of the final products and for sending the manufactured/ other goods. Evidently, use of the input service must be integrally connected with the business related to the manufacture of the final product. In a recent judgment in the case of CCE Chennai vs. Sundaram Brake Lining Limited and Others [2010 (019) STR 0172 (T)], the Hon ble CESTAT, Chennai held as under:- The test laid down in Maruti Suzuki (supra) for interpreting the expression used in, or relation to the manufacturer of excisable goods would have to be followed in respect of input services also. The law permits credit of duty /tax in respect of inputs/ inputs services only when the said are used in, or in relation to manufacturer of excisable goods. The law does not provide any other basis. It does not provide for credit on the basis that the value of input/ input service is included in the value of finished excisable goods. Hence, the tests laid down in Maruti Suzuki (supra) cannot be overlooked. Use of the input service must be integrally connected with the manufacturer of the final product. The input service must have nexus wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e cement. Moreover, the example also illustrates that the eligibility of credit in respect of any particular input or input service has to be examined not in a general way but only with reference to the particular finished excisable goods and the manufacturing process involved. 1. That while deciding the issue of admissibility of Cenvat Credit Service Tax paid on fright for outward transportation, the Tribunal allowed the credit of service tax paid on fright on outward transportation beyond the place of removal i.e. Factory gate or Depot as the case may to the buyer's premises on FOR destination basis. While granting the benefit of credit of service tax paid on outward freight till the buyer's premises on FOR destination basis, for the period from April 2010 to September 2011, the Tribunal relied on clarification issued in Para 8.2 of the CBEC Master Circular No. 97/8/2007 dated 23.08.2007 which is as under:- .. That for a manufacturer/ consignor, the eligibility to avail credit of the service tax paid on the transportation during the removal of excisable goods would depend upon the place of removal as per the definition. In case of a factory gate sale, from a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the place of removal i.e. Factory gate or Depot as the case may be to the buyer s premises on FOR destination basis does not appear to be permissible in law. That Rent-a-cab service is more in the nature of the facility extended to the employees and not in relation to business of manufacture and therefore would not qualify as input service. Furthermore , the assessee has not submitted the bifurcation of use of cabs for business purpose or otherwise. It is clearly stated in OIO that on perusal of the bills, it was observed that the taxies were engaged by the persons who were not the employees of the assessee and therefore it cannot be treated to be used directly or indirectly, in or in relation to manufacture of final product. Auction and Club House service may be useful to the assessee but they fail to be an integral part of the business to effect its efficacy and quality. The business of the assessee can function equally well without these services.The contention of the assessee that the expenses pertained to visits of their employee outside city area in relation to business finds no substance as the expenses incurred relates to recreation and entertainment of the employ ..... X X X X Extracts X X X X X X X X Extracts X X X X
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