Commr. of C. Ex., Cus. and S.T., Belgaum vs Vasavadatta Cements Ltd.

N. Kumar, J.—This appeal is by the revenue challenging the order passed by the Tribunal upholding the order of the Commissioner of Central Excise (Appeals), Mangalore and granting the benefit of CENVAT credit to the assessee.

The assessee-M/s. Vasavadatta Cements Ltd., Sedam, Gulbarga District are manufacturers of cement and clinker. They are also registered under the Service Tax Act. They are availing CENVAT credit of service tax paid on various input services under the CENVAT Credit Rules, 2004 for payment duty on their final product. The assessee availed CENVAT credit of service tax paid on freight charges incurred from their depot to customer /factory to customers as ''input service'' under CENVAT Credit Rules, 2004 and utilised towards payment of duty on the clearances of final product.

The revenue disallowed the said CENVAT credit on the ground that service tax paid on freight charges incurred from depot to customers/from factory to customer is not covered under the definition of ''input services'' for availing CENVAT credit. Aggrieved by the same, the assessee preferred an appeal before the Commissioner of Central Excise (Appeals). The Commissioner of Central Excise (Appeals), interpreting the definition of input service held that inclusion of inward transportation of inputs or capital goods and outward transportation upto place of removal and CBEC clarification issued with reference to this inclusion, by no means exclude service unused for clearance of final product from the place of removal from being treated as eligible input service in terms of main definition. Goods transport service is therefore an input service even when used for clearance of final availment credit on the same cannot be denied. Therefore, he set aside the order passed by the Assessing authority. Aggrieved by the same, the revenue preferred an appeal before the Tribunal, relying on the judgment of the Larger Bench of the Tribunal in the case of (2009) 18 STJ 369 where it was held that the definition of "input service" has to interpreted in the light of the requirements of business and it cannot be read restrictively so as to confine only up to the factory or up to the depot of the manufacturers and has held that the outward transportation of final products from the place of removal should be treated as an input service in terms of Rule 2(1)(ii) of the CENVAT Credit Rules, 2004 and allowed the credit to the manufacturers. Therefore, the Tribunal held that the order of the Commissioner of Central Excise (Appeals) is in accordance with law and therefore, dismissed the appeal. Aggrieved by these two orders, the revenue is in appeal.

Learned counsel appearing for the revenue, assailing the impugned orders, contended that "input service" as defined under the Rules do not extend to the transportation services rendered from the factory of godown to the customer. Therefore, he contends that the said judgments are illegal and requires to be interfered with.

The entire case rests on the interpretation to be placed to the definition of input service. Input service is defined as under :

(I) "input service" means any service. -

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

or

(ii) used by the manufacture, whether directly or indirectly. In or in relation to the manufacture of final products and clearance of final products form 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 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 capitals goods and outward transportation upto the place of removal;

As is clear from the definition input service means any service used by the manufacture 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 inward transportation of inputs or capital goods and outward transportation upto the place of removal. It is while interpreting this provision. The Larger Bench of the Tribunal has rightly held that the input service has to be interpreted in the light of the requirement of business and it cannot be read restrictively so as to confine only up to the factory or up to the depot of the manufacture. Service extends to the stage of handing over the goods to the customers for whom it is meant and therefore, any service tax paid upto that point, is to be taken into consideration while granting the CENVAT benefit and therefore. We do not see any illegality in the impugned orders, which calls for interference.

Accordingly, appeal is rejected.