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M/s. Swastika Steel & Allied Products Pvt. Ltd. v/s CCE, Kol-II

    Ex.Misc. Application (ROA) No. 77301 of 2018 & Ex. Appeal No. 76711 of 2017 Arising out of Order-in-Appeal No. 32/Kol.II of 2017 & Order No. MO. 75533 of 2019 & FO. 75409 of 2019

    Decided On, 02 April 2019

    At, Customs Excise amp Service Tax Appellate Tribunal East Regional Bench Kolkata


    For the Appellant: S. P. Siddhanta, Consultant. For the Respondent: S. Mukhopadhyay, Authorized Representative.

Judgment Text

1. The present Miscellaneous Application has been filed by the applicant/appellant for restoring of their appeal which was dismissed for non-prosecution vide Final Order No. 76621/2018 dt. 13/09/2018.

2. The Ld. Consultant appearing on behalf of the applicant/appellant submits that the earlier counsel engaged by the appellant was unable to attend the earlier date fixed for hearing owing to his illness and there was no communication neither to the client nor any prayer for adjournment was made before the Tribunal.

The Ld. Consultant further submits that they have a strong case on merits and accordingly, prays for restoration of the appeal.

In view of the submissions as made by the Ld. Consultant, the Order dt. 13/09/2018 dismissing the appeal is recalled and the appeal is restored to its original number.

With the consent of both sides, the appeal itself is taken up for hearing.

3. Briefly stated the facts of the case are that the appellants are engaged in the manufacture of Non Alloy Steel, Rolled Bar, Flats etc. classifiable under Chapter 72 and 73 of the First Schedule to the Central Excise Tariff Act, 1985.

Show Cause Notice dt. 18/02/2010 was issued alleging contravention of Provisions of Rule 2 (a), 3, 4 & 9 (3) of CCR, 2004 and inadmissible availment of Cenvat Credit of Service Tax on outward freight/transportation and outward delivery services (outward GTA Service) for the period from 2005-06 to 2007-08.

The Adjudicating Authority confirmed the demand and ordered for recovery of the same along with interest and also imposed equal amount of penalty in terms of Section 11 AC of the Central Excise Act, 1944 read with Rule 15 of the CCR, 2004.

On appeal, the Lower Appellate Authority upheld the Adjudication Order and rejected the assessee’s appeal. Hence, the present appeal before the Tribunal.

4. Heard both sides and perused the appeal records.

5. I find that the issue is no more res-entigra in view of the following decisions of the Hon’ble Supreme Court.

(i) Commissioner of Central Excise, Belgaum vs. Vasavadatta Cements Ltd. [2018 (11) G. S. T. L. 3 (S. C.)

(ii) Commissioner of Cus., C. Ex. & S. T., Guntur vs. Andhra Sugars Ltd. [2018 (10) G. S. T. L. 12 (S. C.)

6. In the case of CCE, Belgaum vs. Vasavadatta Cements Ltd. (Supra), the Hon’ble Supreme Court held thus:-

“4. We may make it clear that in the instant appeals, we are concerned with the first part of the definition. Insofar as second part is concerned, certain contentions, which have been raised by some of the assessees, have been rejected and that aspect is decided in favour of the Department. Since these appeals are filed by the Department questioning the interpretation that is given by the CESTAT as well as the High Court in respect of first part, we are not making any comments insofar as judgment of the CESTAT pertaining to second part is concerned.

5. Coming back to the first part of the definition as to what input service means, the Full Bench of the CESTAT held that all input services which are used by the manufacturer, whether directly or indirectly, in or in relation to manufacture of final products and clearance of final products from the place of removal are concerned, they are treated as input services and Cenvat credit in respect of expenditure incurred in relation to such services would be admissible. The expression with which the CESTAT was concerned, and which was the subject matter of discussion, was as to what would be the meaning of “from the place of removal”. Obviously, any input service given for clearance of the final products “from the place of removal” and tax paid thereon the Cenvat credit has to be given. The question is from the place of removal up to what place. The assessees had claimed the tax paid on the transportation of final products from the place of removal (i.e. the place of manufacture) to either the place to their respective depots or transport upto the place of the customers, if from the place of removal the goods were directly delivered at customers place. It is made clear that only first set of transportation from the place of removal was claimed. To put it otherwise, in those cases where the tax paid on transportation on the goods from the place of removal upto the place of depot only that was claimed and if there was any such tax again paid from the place of depot to the place of customers, the Cenvat credit thereof was not claimed and there is no dispute about it.

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.

8. Our view gets support from the amendment which has been carried out by the rule making authority w.e.f. 1-4-2008 vide Notification No. 10/2008-C.E. (N.T.), dated 1-3-2008 whereby the aforesaid expression “from the place of removal” is substituted by “upto the place of removal”. Thus from 1-4-2008, with the aforesaid amendment, the Cenvat credit is available only upto the place of removal whereas as per the amended Rule from the place of removal which has to be u

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pto either the place of depot or the place of customer, as the case may be. This aspect has also been noted by the High Court in the impugned judgment in the following manner : “However, the interpretation placed by us on the words ‘clearance of final products from the place of removal’ and the subsequent amendment by Notification 10/2008-C.E. (N.T.), dated 1-3-2008 substituting the word ’from’ in the said phrase in place of ‘upto’ makes it clear that transportation charges were included in the phrase ‘clearance from the place of removal’ upto the date of the said substitution and it cannot be included within the phrase ‘activities relating to business’.” 7. I find that the facts of the present case are squarely covered by the aforesaid judgment of the Apex Court. By respectfully following the aforesaid judgment of the Hon’ble Supreme Court, the impugned order is set aside and the appeal filed by the appellant is allowed, with consequential benefits to the appellant.