CENVAT credit not available on GTA service used for transportation of final product from place of removal

CESTAT, BANGALORE BENCH

Madras Cements Ltd.

versus

Commissioner of Central Excise

FINAL ORDER NOS. S-335 & 336 OF 2012

APPEAL NOs. E/360 & 361 OF 2010

MAY 29, 2012

ORDER

P.G. Chacko, Judicial Member – In both the appeals filed by the assessee, the short question which arises for consideration is whether the appellant can claim CENVAT credit of service tax paid on GTA service which was availed for clearance of their final products from the place of removal to customers’ premises during the period of dispute. The first appeal is directed against denial of CENVAT credit on GTA service for the period from August 2006 to October 2007 and second appeal against denial of CENVAT credit on the same service for the period from November 2007 to July 2008. GTA service was employed by the appellant for outward transportation of their final product (cement) from factory/depot (place of removal) to customers’ premises. The authorities below have denied the benefit to the appellant by holding that the service used by them for such transportation of goods was not an ‘input service’ as defined under Rule 2(I) of the CENVAT Credit Rules, 2004.

2. The learned consultant for the appellant submits that, insofar as, the credit availed for the period up to 31/3/2008 is concerned, there can be no dispute regarding the entitlement of the appellant inasmuch as the Hon’ble High Court has held in the case of CCE&ST v. ABB Ltd. [2011] 32 STT 141 that transportation of the final products from place of removal stood included in the definition of Input service’ as it stood prior to 1/4/2008. The learned consultant, therefore, prays for setting aside the impugned order insofar as the CENVAT credit for the period prior to 1/4/2008 is concerned. We have heard the learned Commissioner (A.R.) also, who has acknowledged the decision of the Hon’ble High Court as applicable to the period prior to 1/4/2008.

3. In the above scenario, we hold that the appellant is entitled to take CENVAT credit on GTA service which was used for outward transportation of their final product from the place of removal to customers’ premises prior to 1/4/2008. In the result, the first appeal has to be allowed, and it is ordered accordingly.

4. The period of dispute involved in the second appeal is partly beyond 31/3/2008. To be precise, the immediate question to be considered is whether the appellant can claim CENVAT credit on GTA service used for outward transportation of their final product from the place of removal to customers’ premises from 1/4/2008 to 31/7/2008. This issue, it appears, was not examined by the Hon’ble High Court in the cited case of M/s ABB Ltd. This issue has been hotly agitated before us. The learned consultant for the appellant refers to the wording of the definition of ‘input service’ and submits that there is nothing in the definition to indicate that a manufacturer of excisable goods is barred from availing CENVAT credit on transportation of final products from the place of removal for the period after 31/3/2008. In this connection, it is submitted that the expression ‘place of removal’ used in the definition of ‘input service’ should not be understood as defined under Section-4 of the Central Excise Act. It is submitted that the said definition is for the limited purpose of valuation of excisable goods under Section-4 and cannot be applied to anything connected with CENVAT credit on input services. The learned consultant particularly refers to the inclusive part of the definition of ‘input service’ and points out that “final products” is conspicuously absent therein. Therefore, the definition should not be interpreted to deny CENVAT credit to the appellant on GTA service for the period beyond 31/3/2008.

5. Per contra, the learned Commissioner (A.R.), himself also referring to the terms of the definition of ‘input service’, argues that the amendment of the definition with effect from 1/4/2008 is crucial and has to be given effect to. It is argued that, for a manufacturer of excisable goods to claim CENVAT credit on GTA service used for transportation of such goods, he can claim the benefit only up to the place of removal and not beyond that. Contextually, he refers to the decision in the case of CCE v. Hindustan Zinc Ltd. [2011] 32 STT 102, a referral order passed by one of us sitting singly. The learned Commissioner, (A.R.) claims support from the view taken by the learned Single Member in the cited order. To a query from the bench, however, the answer is that there is no information as to whether the referred issue has since been settled by any Division Bench.

6. We have given careful consideration to the submissions, We are called upon to deal with the question whether the amended definition of ‘input service’ under Rule 2(I) would operate in favour of the assessee for the period beyond 31/3/2008. The definition reads as follows:

“(1) “input service” means any service, –

  (i)  used by a provider of taxable service for providing an output service; or

 (ii)  used by a 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, and includes services used in relation to modernisation, renovation or repairs of a factor, premises of provider of output service or an office relating to such factory or premises, advertisement or sales promotion, market research, storage upto the place of removal, procurement of inputs, accounting, auditing, financing, recruitment and quality control, coaching and training, computer networking, credit rating, share registry, security business exhibition, legal services inward transportation of inputs or capital goods and outward transportation upto the place of removal; but excludes services,-

As per the amended definition of ‘input service’, any service used by the manufacturer of final product, whether directly or indirectly, in or in relation to the manufacture of final product and clearance of final product up to the place of removal is an ‘input service’ on which CENVAT credit could be claimed for a period after 31/3/2008. The expression “up to the place of removal” has a clear and absolute meaning beyond the pale of doubt. In the present case, the final product was cleared from the place of removal (whether it be factory or depot) by the appellant by making use of GTA service. The service so used is not coming within the ambit of the definition of ‘input service’ for the period after 31.3.2008. In our mind, we are clear that the appellant is not entitled to claim CENVAT credit on the GTA service used by them for transportation of their final product from the place of removal for any period after 31/3/2008:

7. In the above view of the matter, the appellant cannot claim CENVAT credit for the period after 31/3/2008 and therefore Appeal No. E/361/2010 can only be partly allowed. Accordingly the amount of CENVAT credit admissible to the appellant has to be requantified and the interest payable by them will also have to be redetermined. For this limited purpose, we send the matter to the original authority, who shall quantify the admissible and inadmissible portions of CENVAT credit for the period from November 2007 to July 2008. Needless to say that the assessee should be given a reasonable opportunity of being heard on the limited issue of requantification (along with interest).

8. Appeal No. E/360/2010 stands allowed and appeal No. E/361/2010 stands disposed of in the aforesaid terms.

NF