Cenvat Credit Rules, 2004 – r.2(I) – Cenvat Credit facility availed by assessee during the period from January, 2010 to June, 2010 on outward transportation of goods through a transport agency from their premises to the customer’s premises – Admissibility of – Held: Not admissible – It is clear from the bare reading of the r.2(I), as amended in the year 2008, which applies to the period in question that the Goods Transport Agency service used for the purpose of outward transportation of goods, i.e. from the factory to customer’s premises, is not covered within the ambit of r.2(I) “input service” of the Rules – It is only ‘upto the place of removal’ that service is treated as input service – Thus, once the final products are cleared from the factory premises, extending the credit beyond the point of clearance of final product is not permissible under Cenvat Credit Rules and post clearance use of services in transport of manufactured goods cannot be input service for the manufacture of final product.
Cenvat Credit Rules, 2004 – r.2(I), as amended in 2008 – Effect of amendment – Held: The original definition of ‘input service’ contained in r.2(I) of the Rules,2004 used the expression ‘from the place of removal’ – However, vide amendment in the year 2008, the word ‘from’ is replaced by the word ‘upto’ – Now as per the original 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 – However after the amendment, 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 – The word ‘from’ is the indicator of starting point, whereas the expression ‘upto’ signifies the terminating point, putting an end to the transport journey.
Allowing the appeal, the Court
HELD: 1. 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, it is entitled to avail the benefit of Cenvat Credit in respect of any input service tax paid. Input service tax was also paid on the outward transportation of the goods from factory to the customer’s 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(I) of the Rules, 2004. It is an admitted position that the instant case does not fall in sub-clause (i) to r.2(I) and the issue is to be decided on the application of sub-clause (ii) to r.2(I). Reading of the clause (ii) 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’. [Paras 4, 5 and 6] [656-A-C, F-G]
2. The original definition of ‘input service’ contained in Rule 2(l) of 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. However, vide amendment carried out in the aforesaid Rules in the year 2008, the word ‘from’ is replaced by 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 therefrom. 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, i.e. from the factory to customer’s premises, is not covered within the ambit of Rule 2(l)(i) of Rules, 2004. The word ‘from’ is the indicator of starting point, whereas the expression ‘upto’ signifies the terminating point, putting an end to the transport journey. [Para 7] [656-G-H; 657-A-D]
3. The Board’s Circular dated August 23, 2007 was issued in clarification of the definition of ‘input service’ as existed on that date i.e. it related to unamended definition. Therefore, it cannot be applied after amendment in the definition of ‘input service’ which brought about a total change. Now, the definition of ‘place of removal’ and the conditions which are to be satisfied have to be in the context of ‘upto’ the place of removal. It is this amendment which has made the entire difference. That aspect is not dealt with in the said Board’s circular, nor it could be. Furthermore, if such a circular is made applicable even in respect of post amendment cases, it would be violative of Rule 2(l) of Rules, 2004 and such a situation cannot be countenanced. [Paras 10, 11 and 12] [659-B-C; 661-E-F]
Commissioner of Central Excise Belgaum v.
M/s. Vasavadatta Cements Ltd. (Civil Appeal No. 11710 of 2016) decided by Supreme Court of India vide Judgment dated 17.01.2018 – referred to.
As published in the Supreme Court Reports, Supreme Court of India. Text from the Indian Supreme Court Judgments open data set (Dattam Labs), CC BY 4.0.
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