Aggrieved by the original order dated
August 22, 2011, the assessee preferred an appeal before Commissioner
(Appeals). The Commissioner (Appeals) vide order dated March 15, 2012 allowed
the appeal and set aside the original order holding that assessee is
eligible for availment of service tax paid on Goods Transport Agency service on
the outward freight from the factory to the customers' premises as per
the Board's Circular dated August 23, 2007. It was now the turn of the Revenue to
feel aggrieved by the order. Accordingly, appeal was filed before100 the Customs, Excise and Service
Tax Appellate Tribunal by the Revenue which was rejected vide judgment dated 1st
of May,120 2015. Further appeal to
the High Court preferred by the assessee has met the same fate as the said
appeal has been dismissed by the High Court of Karnataka vide its judgment
dated June 29, 2016, which is the subject matter of the present appeal. As
mentioned above, the assessee is involved in packing and clearing of cement. It
is supposed to pay the service tax on the aforesaid services. At
the same time,200 it is entitled to avail
the benefit of Cenvat Credit in respect of any input service tax
paid. In the instant case, input service tax was also paid on the outward transportation
of the goods from factory to the customer's240 premises of which the assessee
claimed the credit. The question is as to whether it can be treated as 'input
service'.
'Input service' is
defined in Rule 2 of the Rules, 2004. As per definition, “input service"
means any service used by a provider of taxable service for providing an
output services; or used by the manufacturer, whether300 directly or indirectly, in
or in relation to the manufacture of final products and clearance
of final products upto the place of removal and includes services used in
relation to setting up, modernization, 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,360 storage upto 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 goods400 and outward transportation upto
the place of removal.
It is an admitted position that the instant case does not fall in
sub-clause (i) and the issue is to be decided on the application of
sub-clause (ii). Reading of the aforesaid provision makes it clear that those
services are included which are used by the manufacturer, whether directly or
indirectly, in or in relation to the manufacture of final products and
clearance of final products 'upto the place of removal'.480
It may be relevant to point out here
that the original definition of 'input service' contained in Rule 2 of500 the Rules, 2004 used the
expression 'from the place of removal'. As per the said definition, service
used by the manufacturer of clearance of final products 'from the place of
removal' to the warehouse or customer's place etc., was exigible
for Cenvat Credit. This stands finally decided in Civil Appeal No. 11710 of
2016 vide judgment dated January 17, 2018. However, vide amendment carried out
in the aforesaid Rules in the year 2008, which became effective from
March 1, 2008, the word 'from' is replaced by600 the word 'upto'. Thus, it is
only 'upto the place of removal' that service is treated as input service. This
amendment has changed the entire scenario. The benefit which was admissible
even beyond the place of removal now gets terminated at the place of removal
and doors to the Cenvat credit of input tax paid gets closed at that
place. This credit cannot travel from there. It becomes clear from the bare
reading of this amended Rule, which applies to the period in question that the
Goods Transport Agency service used for the purpose of outward
transportation of goods, is700 not covered within the ambit of Rule 2 of Rules, 2004. The word
'from' is the indicator of720 starting point, whereas the expression 'upto' signifies the
terminating point, putting an end to the transport journey. The Adjudicating
Authority was right in interpreting the “input service” as 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 upto the place of removal. The two clauses in the
definition of 'input services' take care to circumscribe input credit by
stating800 that service used in relation to the clearance from the place of
removal and service used for outward transportation upto the place of removal
are to be treated as input service. The first clause does not mention transport
service in840 particular.
The second clause
restricts transport service credit upto the place of removal. When these two
clauses are read together, it becomes clear that transport services credit
cannot go beyond transport upto the place of removal. The two clauses, the one
dealing with general provision and other dealing with a specific item,
are not to be read in disjunction so900 as to bring about conflict to
defeat the laws' scheme. The purpose of interpretation is to find
harmony and reconciliation among the various provisions. Credit availability
is in regard to 'inputs'. The credit covers duty paid on input materials as
well as tax paid on services, used in or in relation to the manufacture of the
'final product'. The final960 products are manufactured by the assessee in their factory
premises and once the final products are fully manufactured and cleared from
the factory premises, the question of utilization of service does not
arise as such services cannot be considered as1000 used in relation to the
manufacture of the final product. Therefore, extending the credit beyond the
point of removal of the final product on payment of duty would be contrary to
the scheme of Cenvat Credit Rules.1037
