CESTAT, NEW DELHI BENCH
Commissioner of Central Excise, Lucknow
FINAL ORDER NOS. 821-824 OF 2012-SM(BR)
APpEAL NOS. E/506, 2800-2801 & 2813 OF 2011-Sm
JUNE 15, 2012
Mathew John, Technical Member
In this proceeding four appeals are being considered. The dispute is about the same issue but for different periods has shown in the following table :-
|S.No.||Appeal No.||Period of dispute||Amount of duty involved Rs.|
|3.||E/2801/11||April 2009 to December 2009||2,28,008/|
|4.||E/2813/11||January 2010 to September 2010||61,978/-|
2. The appellant is a manufacturer of sugar. They paid excise duty on sugar at the applicable rate which was prescribed per quintal of sugar and then they cleared the goods from the factory to their storage places at Agra and Farrukhabad. They availed benefit of Cenvat Credit Rules, 2004.
3. The issue involved in these appeals is whether they were eligible to take Cenvat credit on different services viz.: –
(1) Rent of godown at Agra/ Farrukhabad.
(2) Sugar handling charges at the said godowns.
(3) Security services availed at the said godowns.
(4) Insurance of sugar in transit.
(5) Insurance of cash/money in transit.
(6) Insurance of cashier.
(7) Vehicles hire charges.
(8) Insurance of Vehicles.
(9) Installation charges of gay rope mask.
4. The Revenue was of the view that the above services availed by them were not in relation to the manufacture of sugar and the services were availed after clearances of the goods on payment of duty from their factory, and that such services availed after clearances of their goods from their factory cannot quality to be input services within the meaning of definition given at Rule 2(l) of Cenvat Credit Rules, 2004. It is to be noted that the said rule has undergone changes during the disputed period. The relevance of the amendment may have to be examined. The definition as was prevailing prior to 01-04-2008 is given below:
“(I) “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 from 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, 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;”
(Clauses relevant to the dispute at hand are highlighted)
5. The contention of the Counsel for the appellant is that they were selling sugar from the godown at Agra and Farrukhabad. The above definition of input services allowed Cenvat credit for services utilised in relation to storage up to the place of removal. This expression is there in the said definition throughout the disputed period.
6. The Counsel points out that Cenvat Credit Rules, 2004 does not define the expression ‘place of removal’. However, Rule 2(p) of said Rules prescribes that whichever words and expressions are not defined in the said Rules but are defined in the Central Excise Act, 1944 or Finance Act, 1994 the said definition will apply for the purpose of the said Rules. He Invites attention to the definition to “place of removal” in Section 4 of the Central Excise Act, 1944 which reads as under:
(c) “place of removal” means –
(i) a factory or any other place or premises of production or manufacture of the excisable goods;
(ii) a 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;
7. It is his contention that the godown at Agra and Farrukhabad are the “places of removal” in this case because it is a place where sugar is stored after clearance from factory and is sold from the said godowns. Thus this place falls within clause (iii) of the definition of place of removal. He takes support from the Circular issued by CBEC viz. 137/3/2006-CX, dated 2nd Feb. 2006 explaining that for the purposes of Cenvat Credit Rules, 2002 the definition of “place of removal” as given in Section 4 of Central Excise Act will apply. He points out further that para -4 of the said circular clearly states that the said definition will apply even in cases of goods which are subjected to specific rates of duty or duty based on value prescribed under Section 4A of Central Excise Act, notwithstanding the fact that the said expression is defined under Section 4 with a preamble that the definition is for the purposes of the said Section 4. He further points out that this issue was considered by the Division Bench of the Tribunal in L.G. Electronics (India) (P.) Ltd. v. CCE  28 STT 183 (New Delhi – CESTAT). He invites attention specifically to para 5 and para 6.1 of the said decision.
8. He has a further argument that the expression services in relation to “activity relating to the business” is specifically included in the definition of input services for the entire period in dispute even though the said expression has been deleted in the year 2011. Therefore his contention is that going by the clarification issued by the CBEC and by the decision of the Tribunal in the case of L.G. Electronics (supra) he should be entitled for services utilised by him for maintaining the storage facility at Agra and Farrukhabad.
9. Another issue which was discussed during the hearing is whether the expression “storage up to the place of removal” used in the definition of input service will cover storage at the place of removal also. It is pointed out by the counsel that whenever a notification is issued with the provision that it is valid up to a particular date it is always considered as valid for the date specified for expiry. His argument is that expression “storage up to the place of removal” has to be interpreted to mean “storage up to and including the place of removal” because in made practice no storage takes place between clearance from factory and reaching the place of removal and if interpreted to mean storage in transit till the goods reaches place of storage it will render the expression virtually meaning less.
10. Opposing the above contention, the ld. AR for Revenue submits that the Apex Court in the case of Maruti Suzuki Ltd. v. CCE  22 STT 54 (SC) has observed as under:
“The said expression “used in or in relation to the manufacture” have many shades and would cover various situations based on the purpose for which the input is used. However, the specified input would become eligible for credit only when used in or in relation to the manufacture of final product.”
His contention is that going by the standard prescribed by the Apex court in the said case services involved has no nexus with the manufacturing activity and credit on such services cannot be allowed. He also argues that services availed after clearance of the goods from the factory cannot be construed as an “input service” and therefore credit on such services cannot be allowed. According to him, the place of removal in the case of sugar manufactured by the assessee is the factory of the appellant from where the goods are cleared on payment of duty. He also argued that the expression storage up to the place of removal cannot include storage of the goods at the godowns even if the godowns are considered as place of removal.
11. I have considered arguments on both the sides. I find that the question whether the place where goods are stored after clearance from the factory on payment of duty can be considered as “place of removal” for the purpose of Rule 2(l) of Cenvat Credit Rules, 2004 is no longer res integra because of the clarification issued by the CBEC in the matter and approved by the decision of the Tribunal in the case of LG Electronics (supra) and the decision of Punjab & Haryana High Court in the case of Ambuja Cements v. Union of India  20 STT 182 (Punj. & Har.). Therefore the godowns at Agra and Farrukhabad are to be considered as “place of removal” for the appellant notwithstanding the fact that sugar is an item subjected to specific rate of duty.
12. I have also considered the issue whether the expression storage up to the place of removal would include the storage at the place of removal itself as argued by the Counsel for the Appellant. The normal interpretation of the words “up to” something is to include the something as is seen from the example quoted by the counsel. Going by such interpretation services for storage at the place of removal should be allowed as input services. If an interpretation is given that services only till the goods reaches the place of removal and not storage at the place of storage, the expression services in relation to storage up to the place of removal used in me inclusive part of the definition to input services becomes meaningless and it is not reasonable to adopt such an interpretation.
13. I also note that the decision of the apex court in the case of Maruti Suzuki Ltd. (supra) is with reference to inputs. It was with reference to inputs used for generation of electricity, part of which was sold to grids outside the factory. This decision cannot applicable to input services and in fact there is nothing in the said decision which is repugnant to the interpretation given above. The standard of nexus has to be judged between input and manufactured goods will be different from the standards for input services because inputs are tangibles and input services are intangible. The definitions adopted for inputs and input services at Rule 2(k) and Rule 2(l) of Cenvat Credit Rules, 2004 reflect different standards. Rule 2(l) of Cenvat Credit Rules specifically includes many post manufacturing activities like service relating to sales, promotion etc: and therefore standard prescribed for inputs cannot be adopted for input services. Therefore I am not convinced by the argument advanced by Revenue that these services have no nexus the goods manufactured.
14. I note that certain amendments have been made to the definition at Rule 2(l). Out of these amendments, the one made by Notf. No. 10/2008-CE (NT), dated 1-03-08 making amendments with effect from 01-04-08, is during the period of dispute. The amendment made by Notf. 3/2011 dated 01-03-2011 is outside the period of dispute. Further the expression “storage at the pace of removal” continues notwithstanding these amendments. So I am not examining these amendments.
15. In view of the reasoning as given above, there is no reason to deny Cenvat credit of tax paid on items 1 to 3 as listed at para 3 above. The next three items relate to insurance of raw material and cash in transit. The counsel submits that such cash disbursement is for procurement of raw material, and has direct nexus with the manufacturing activity. So is the case of insurance of cashier which is the 6th item. In the matter of Vehicle Hire charges and insurance of company owned vehicles (items at Sr. No. 7 and 8) already there are decisions of the High Courts allowing credit of service tax paid on such service. In the case of charges of gay rope mask, the counsel for the appellant submits that this is services required for their efficient functioning at the place of procurement of raw material and it has got direct nexus in the manufacturing activity and the same cannot be denied as involved on this item is only Rs. 2954 /-.
16. In view of the discussions above I am convinced that the appellants are eligible for the disputed Cenvat credits and therefore I set aside the impugned orders of the lower authorities and allow the disputed Cenvat credits to the appellants.