Commissioner of Central Excise Ambalal Sarabhai Enterprises Ltd.

VATLaws (Readable Version) - Wednesday, June 26, 2013
[2013] 57 VST 21 (Guj)
[IN THE GUJARAT HIGH COURT]
Commissioner of Central Excise
Ambalal Sarabhai Enterprises Ltd.
V.
AKIL KURESHI AND SONIA GOKANI (MS) , JJ.
April 21, 2011
HF ♦ Assessee, including dealer (Registered or Unregistered)
SERVICE TAX--CENVAT CREDIT--INPUT SERVICE--DEFINITION--COURIER SERVICE USED BY
MANUFACTURER FOR TRANSPORTATION OF FINISHED GOODS FROM FACTORY AND BRINGING
INPUTS INTO FACTORY--IS INPUT SERVICE--SERVICE TAX PAID THEREON CAN BE AVAILED OF AS
CENVAT CREDIT--CENVAT CREDIT RULES, 2004, R. 2(L).
Courier service utilised by a manufacturer for transportation of finished goods from the factory and bringing
inputs into the factory are covered within the expression “any service used by the manufacturer directly or
indirectly in or in relation to the manufacture of final products and clearance of final products from the place of
removal” in the definition of “input service” under rule 2(l) of the Cenvat Credit Rules, 2004 and therefore
service tax paid on courier services by the manufacturer was eligible for Cenvat credit.
CCE and Customs v. Parth Poly Wooven P. Ltd. [2012] 47 VST 305 (Guj); [2012] 12 GSTR 419 (Guj) followed.
Order of the Customs, Excise and Service Tax Appellate Tribunal affirmed.
CCE and Customs v. Parth Poly Wooven P. Ltd. [2012] 47 VST 305 (Guj); [2012] 12 GSTR 419 (Guj) (paras 5,
6, 7) and ABB Ltd. v. CCE and Service Tax [2009] 92 RLT 665 (Trib.-Mum) [LB] (para 3) referred to.
Tax Appeal No. 433 of 2010 decided on April 21, 2011
Y.N. Ravani for the appellant
Dhaval Shah for the respondent
Cases referred to :
CCE and Customs v. Parth Poly Wooven P. Ltd. [2012] 47 VST 305 [2012] 12 GSTR 419 (Guj)
followed
CCE and Customs v. Parth Poly Wooven P. Ltd. [2012] 47 VST 305 [2012] 12 GSTR 419 (Guj)
referred to
ABB Ltd. v. CCE and Service Tax [2009] 92 RLT 665 (Trib.-Mum) [LB] referred to
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JUDGMENT 1
The judgment of the court was delivered by
AKIL KURESHI J.-The Revenue is in appeal against the judgment of the
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VATLaws (Readable Version) - Wednesday, June 26, 2013
Customs, Excise and Service Tax Appellate Tribunal dated July 22, 2009
raising the following questions for our consideration:
"(i) Whether the CESTAT was right in considering the service,
namely, outward transportation in respect of courier service and
clearing agents, availed of by the assessee, as eligible services for
availing of input service credit as defined under rule 2(l) of the Cenvat
Credit Rules, 2004?
(ii) Whether the Tribunal committed an error in overlooking the
definition of 'place of removal' prescribed under rule 4(3)(c) of the
Cenvat Credit Rules, 2004, more particularly when goods are cleared
by the assessee from the place of manufacturing after payment of
duty?"
The short facts are as follows. The respondent-assessee had claimed
Cenvat credit on service tax paid on the courier service provided by various
courier agencies. Service of such courier agencies were utilised for transportation
of finished goods from the factory and also for bringing inputs
into the factory. These facts emerge clearly from the order-in-original
passed by the adjudicating officer in his order dated July 31, 2008, the relevant
portion of which reads as under:
"2. On scrutiny of E.R.-I returns for the period from January, 2007
to December, 2007, it was noticed that the assessee has taken service
tax credit on courier services paid to courier service providers, namely,
M/s. XPS couriers, M/s. Gati couriers and SAFEX Express (P) Ltd.,
Ab'ad and clearing agent, namely, Gujarat State Export Corporation
and UTI Worldwide Export Corporation. The said courier service providers
and clearing agents took delivery of the finished goods from
the factory and the inputs into the factory. The service tax on courier
1 Oral.
Page No: 22
services paid to the clearing agents and courier service providers is
not admissible as per rule 2(l) of the Cenvat Credit Rules, 2004.
Therefore, service tax paid on courier services and clearing agents of
the goods is not eligible for availment of Cenvat credit. The said
assessee had taken credit of service tax of Rs. 75,727, Rs. 1,545 as
education cess and secondary higher education cess of Rs. 613 on
courier services and clearing agent as per details provided by the
assessee on service tax appears to be recoverable along with interest."
The adjudicating officer was of the opinion that the assessee was not
entitled to avail of such credit. He therefore, after issuance of show-cause
notice and hearing the respondents passed an order dated July 31, 2008.
The assessee challenged the order before the appellate authority. The
Commissioner (Appeals), by his order dated March 17, 2009, dismissed the
appeal upon which the assessee approached the Tribunal. The Tribunal by
way of the impugned order dated July 22, 2009 allowed the appeal relying
on the decision of the larger Bench of the Tribunal in the case of ABB Ltd.
v. CCE and Service Tax reported in [2009] 92 RLT 665 (Trib.-Mum) [LB].
Thereupon, the Revenue has approached this court in the present tax
appeal.
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From the facts on record, it clearly emerges that the assessee had transported
its goods from the factory through courier service. On service tax
paid on such courier service, the assessee seeks Cenvat credit. The entire
issue revolves around the definition of "input service" contained in rule 2(l)
of the Cenvat Credit Rules, 2004. Rule 2(l) reads as under:
"(l) '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 up to the place of removal,
and includes services used in relation to setting up, modernisation,
renovation or repairs of a factory, premises of provider of output
service or an office relating to such factory or premises, advertisement
or sales promotion, market research, storage up to the place of
removal, procurement of inputs, activities relating to business, such as
accounting, auditing, financing, recruitment and quality control,
coaching and training, computer networking, credit rating, share
registry, and security, inward transportation of inputs or capital goods
and outward transportation up to the place of removal;"
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Issue of similar nature came up before this court in Tax Appeal No. 419/
2010 (CCE and Customs v. Parth Poly Wooven P. Ltd. [2012] 47 VST 305
(Guj); [2012] 12 GSTR 419 (Guj)), wherein the assessees were claiming
credit of service tax paid on the goods transport agency ("GTA" for short)
service on outward transportation of the goods beyond the place of
removal relying on rule 2(l) of the Cenvat Credit Rules, 2004. This Bench
framed the question in the following manner (page 422 of 12 GSTR):
"Whether, in the facts of the case, the Tribunal was justified in
holding that the assessee was entitled to avail of Cenvat credit on the
service tax paid on GTA service on outward transportation of the
goods beyond the place of removal in view of definition contained in
rule 2(l) of the Cenvat Credit Rules, 2004 defining the term 'input
service'?"
This court by the judgement dated April 6, 2011 (CCE and Customs v.
Parth Poly Wooven P. Ltd. [2012] 47 VST 305 (Guj); [2012] 12 GSTR 419
(Guj)), after considering the statutory provisions applicable and series of
decisions cited, answered the question in favour of the assessee and
against the Revenue. The Tribunal's judgment was confirmed. The tax
appeals were dismissed. Reliance was placed on the definition of "input
service" contained in rule 2(l) of the Cenvat Credit Rules, 2004 which was
interpreted to be expansive in nature. It was observed as under (pages 320
and 321 of 47 VST):
"Bearing in mind the above judicial pronouncements, if we revert
back to the definition of the term 'input service', as already noticed, it
is coined in the phraseology of 'means and includes'. Portion of the
definition which goes with the expression means, is any service used
by the manufacturer whether directly or indirectly in or in relation to
the manufacture of final products and clearance of final products from
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VATLaws (Readable Version) - Wednesday, June 26, 2013
the place of removal. This definition itself is wide in its expression and
includes large number of services used by the manufacturer. Such
service may have been used either directly or even indirectly. To qualify
for input service, such service should have been used for the
manufacture of the final products or in relation to manufacture of
final product or even in clearance of the final product from the place
of removal. The expression 'in relation to manufacture' is wider than
'for the purpose of manufacture'. The words 'and clearance of the
final products from the place of removal' are also significant. Means
part of the definition has not limited the services only up to the place
of removal, but covers services used by the manufacturer for the
clearance of the final products even from the place of removal. It can
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