Case Law Details
Bunty Foods (India) Pvt Ltd Vs Commissioner of Central Excise (CESTAT Mumbai)
Introduction: The case of Bunty Foods (India) Pvt Ltd against the Commissioner of Central Excise (CESTAT Mumbai) revolves around the disallowance of CENVAT credit amounting to ₹25,96,230 for outward transportation services from the factory to depots. The dispute, limited to the period from January 2005 to April 2007, unfolds in the context of job work undertaken for M/s Parle Products Pvt Ltd. The Commissioner of Central Excise (Appeals), Mumbai-I, initially ruled against Bunty Foods, leading to this appeal.
Detailed Analysis: Bunty Foods engaged in job work for M/s Parle Products Pvt Ltd, and during this process, goods were returned to the principal after processing. The disallowance of CENVAT credit was challenged, asserting that outward transportation of goods before the ultimate clearance by the manufacturer qualifies as an eligible ‘input service’ under CENVAT Credit Rules, 2004.
The appellant cited the decision of the Hon’ble High Court of Karnataka in Commissioner of Central Excise & Service Tax (LTU), Bangalore v. ABB Limited, supporting their claim. The first appellate authority had relied on this ruling, yet the Commissioner contested it. However, the Tribunal, in a similar case involving M/s Parle Products Pvt Ltd’s job-worker, set aside the recovery, affirming the eligibility of CENVAT credit for outward transportation services.
The law on this matter has reached finality, emphasizing that outward transportation of the final product up to the place of removal falls within the definition of ‘input service.’ The Tribunal’s decision aligns with the interpretation that ‘input service’ includes both inward and outward transportation of goods.
Conclusion: The CESTAT Mumbai, in its order pronounced on 01/11/2023, sets aside the disallowance of CENVAT credit for outward transportation services in the case of Bunty Foods. The ruling reiterates the well-established principle that outward transportation up to the place of removal qualifies as an ‘input service,’ emphasizing the liberality in construing the definition. This case serves as a precedent, reinforcing the eligibility of CENVAT credit for outward transportation in similar circumstances.
FULL TEXT OF THE CESTAT MUMBAI ORDER
The issue in this appeal of M/s Bunty Foods (India) Pvt Ltd is limited to the disallowance of CENVAT credit of ₹25,96,230, for the period from January 2005 to April 2007 and availed on tax included in consideration for procurement of ‘outward transportation service’ from their factory to depots of their principals, M/s Parle Products Pvt Ltd, by Commissioner of Central Excise (Appeals), Mumbai-I, in impugned order1 , displacing the order of the original authority in their favour, on appeal at the behest of jurisdictional Commissioner of Central Excise. Further cavil is that the first appellate authority also took recourse to rule 15 of CENVAT Credit Rules, 2004 to impose penalty of like amount on them.
2. We have heard Learned Counsel for appellant and Learned Authorised Representative at length. Learned Counsel for appellant submits that they undertake ‘job-work’ for M/s Parle Products Pvt Ltd and, in the course of which and as prescribed in law, goods are returned after processing to the principal. He submits that, as eligible ‘input service’, procured for transport of goods, before ultimate clearance by manufacturer, they had been availing credit under CENVAT Credit Rules, 2004.
3. He pointed out that their plea before the first appellate authority on eligibility arising from the decision of the Hon’ble High Court of Karnataka in Commissioner of Central Excise & Service Tax (LTU), Bangalore v. ABB Limited [2011 (23) STR 97 (Kar)], upholding the decision of Larger Bench of the Tribunal in ABB Ltd v. Commissioner of Central Excise & Service Tax, Bangalore [2009 (15) STR 23 (Tri- LB)] as held by the original authority, strikes at any basis on which the appellant-Commissioner could have sought coverage by other decision despite which it was held by the first appellate authority that
‘ 10. The lower authority has placed reliance on the ruling of the Hon’ble Karnataka High Court in the case of M/s ABB Ltd (supra). It is revealed from this decision that the grounds of appeal raised by the revenue in this appeal were neither agitated before the Larger Bench of the Hon’ble Tribunal and the Hon’ble High Court nor were such grounds considered by these forums, while delivering the decision in the case of M/s ABB Ltd (supra). It is also revealed that such grounds were also not presented before the Hon’ble Punjab & Haryana High Court in the case of Ambuja Cements Ltd vs. UOI reported in 2009 (236) ELT 431 (P&H) and hence with due respect this ruling can be distinguished from the present case. In view of foregoing, the grounds and relied upon case laws do not come to their help. Accordingly I pass order.’
4. The Tribunal, in MP Biscuits Pvt Ltd v. Commissioner of Central Excise, Allahabad [2012 (282) ELT 563 (Tri-Del)] and in identical circumstances of another ‘job-worker’ of M/s Parle Products Pvt Ltd, set aside the recovery thus
‘11. Reading of above provision clearly show that outward transportation of the manufactured product up to the place of removal falls within the definition of input service. The appellant has placed on record the authorization letter dated 15-3-2005 addressed by PBPL to Assistant/Deputy Commissioner, Central Excise, Varanasi authorising the appellant to manufacture biscuit on their behalf. Further perusal of the terms and conditions mutually agreed upon between PBPL and the appellant would show that as per the job work contract the appellant were required to process and manufacture biscuit, carry out inspection, packing and delivery to various depots of PBPL located all over the country as directed by PBPL. From the above stipulation in the contract, appellants were under obligation to transport biscuits to various depots of PBPL as such obviously the place of removal was/were depots where the appellant was required to supply manufactured biscuit as per direction of the appellant. Admittedly, the appellants have transported the goods to the depots/premises of the principal manufacturer and paid transportation charges including the Service tax. In this regard, the appellant have placed on record photocopies of Form TR-6 for payment of Service tax in respect of the period in question. Thus, it is apparent that the appellant has paid Service tax in respect of the input service i.e. the outward transportation of the biscuits to the place of removal. As such, in view of Rule 3 of Cenvat Credit Rules the appellant has rightly availed Cenvat credit.’
5. We find that the law has attained finality on the issue in dispute thus
‘6. The aforesaid approach of the Full Bench of the CESTAT, as affirmed by the High Court, appears to be perfectly correct and we do not find any error therein. For the sake of convenience, we would like to reproduce the following discussion contained in the judgment of the High Court.
“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 portion of the definition of ‘input service’ deals with service used by the manufacturer, whether directly or indirectly, in or in relation to the manufacture of final products. It also includes clearance of final products from the place of removal. Therefore, services received or rendered by the manufacturer from the place of removal till it reaches its destination falls within the definition of input service. What are the services that normally a manufacturer would render to a customer from the place of removal? They may be packing, loading, unloading, transportation, delivery, etc. Though the word transportation is not specifically used in the said section in the context in which the phrase ‘clearance of final products from the place of removal’ is used, it includes the transportation charges. Because, after the final products has reached the place of removal, to clear the final products nothing more needs to be done, except transporting the said final products to the ultimate destination i.e. the customer’s/buyer of the said product, apart from attending to certain ancillary services as mentioned above which ensures proper delivery of the finished product upto the customer. Therefore, all such 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 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, i.e., up to the place of removal.
7. As mentioned above, the expression used in the aforesaid Rule is “from the place of removal”. It has to be from the place of removal upto a certain point. Therefore, tax paid on the transportation of the final product from the place of removal upto the first point, whether it is depot or the customer, has to be allowed.’
as held by the Hon’ble Supreme Court in Commissioner of Central Excise, Belgaum v. Vasavadatta Cements Ltd [2018 (11) GSTL (SC)].
6. In view of the above, the impugned order is set aside and appeal allowed.
(Order pronounced in the open court on 01/11/2023)
Notes :
1. [order-in-appeal no. BR/304/TH-I/2012 dated 19th November 2012]
