Custom, Excise & Service Tax Tribunal
Apar Industries Ltd vs Surat-I on 5 February, 2024
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL
West Zonal Bench At Ahmedabad
REGIONAL BENCH- COURT NO.3
Excise Appeal No. 10984 of 2021
(Arising out of OIA-CCESA-SRT-APPEALS-PV-024-2021-22 dated 12.10.2021 passed by
Commissioner of Central Excise, CUSTOMS & Service Tax-Surat-I)
APAR Industries Ltd. ......Appellant
A-201/202, BEZZOLA COMPLES, CHEMBUR SION-TROMBAY ROAD
MUMBAI-MUMBAI, MAHARASHTRA
VERSUS
C.C.E. & S.T.-Surat-I ......Respondent
NEW BUILDING...OPP. GANDHI BAUG,
CHOWK BAZAR,
SURAT, GUJARAT-395001
APPEARANCE:
Shri Prakash Shah, Sr. Counsel with Shri Mohit Raval & Shri Yash Prakash,
Advocates appeared for the Appellant
Shri Rajesh Nathan, Assistant Commissioner (Authorized Representative) for
the Respondent
CORAM: HON'BLE MEMBER (JUDICIAL), MR. RAMESH NAIR
HON'BLE MEMBER (TECHNICAL), MR. RAJU
Final Order No.___10324 /2024
DATE OF HEARING: 23.11.2023
DATE OF DECISION: 05.02.2024
RAMESH NAIR
The brief facts of the case are that the Appellant is manufacturer of
transformer oil, aluminium conductor falling under chapter heading 27
and 76 of the First Schedule to the Central Excise Tariff Act, 1985. The
Appellant availed outward transportation service from GTA to transport
the goods from the factory to customer's premises and discharged
service tax under RCM on the said GTA services. The Appellant availed
the credit of the said service tax paid under RCM. However, due to
prevailing ambiguity regarding the admissibility of the credit the
Appellant reversed the said credit under protest.
1.1 The Appellant was issued a show cause notice dated 02.12.2009
demanding the wrongly availed CENVAT credit of service tax paid on GTA
services under RCM for the period January 2005 to June 2007. The said
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demand of the wrongly availed CENVAT credit was confirmed by the
adjudicating authority, which was upheld by the Commissioner (Appeals).
This Tribunal, vide its Order dated 06.01.2020, remanded the
proceedings to the adjudicating authority for fresh adjudication. The
remand proceedings were also concluded by denying and confirming the
demand of the said credit by both the lower authorities. The present
appeal is against the Order of the Commissioner (Appeals) rejecting the
Appellant's appeal against the demand of the wrongly availed credit.
2. Shri Prakash Shah along with Shri Mohit Raval, Advocates for the
Appellant submit that the Appellant availed the GTA services for outward
transportation of the final products on which the service tax is paid under
RCM by the Appellant and since the said services are availed for
transporting goods from the factory to the customer's premise, the said
service qualify as 'input service' and CENVAT credit of same is admissible
to the Appellant. The issue of admissibility of the credit on GTA service
for outward transportation is no longer res-integra as the Hon'ble
Supreme Court, Hon'ble High Courts and this Tribunal in various
judgments allowed the CENVAT of service tax paid on the outward
transportation services prior to the amendment of the definition of input
services under Rule 2(l) of CCR in March 2008. He placed reliance on the
following judgments: -
Commissioner of Central Excise, Belgaum v. M/s. Vasavadatta
Cements Ltd., 2018 (11) G.S.T.L. 3 (S.C.)
Commissioner of Cus., C. Ex. & S.T., Guntur vs Andhra Sugars Ltd.,
2018 (10) G.S.T.L. 12 (S.C.)
Commissioner v. Parth Poly Wooven Pvt. Ltd., 2012 (25) S.T.R. 4
(Guj.)
Commr., CGST &C.Ex., Vadodara-II Vs. Gujarat Guardian Limited,
2018 (12) G.S.T.L. 300 (Guj.)
ABB Limited vs CCE, Bangalore, 2009 (15) STR 23 (Tri.-LB)
3|Page E/10984/2021
Evonik Specialty Silica India Private Limited vs C.C.E. & S.T. -Surat-
II, 023 (11) TMI 261 - CESTAT Ahmedabad
India Cements Ltd vs CCGST & CX, Trichy - 2022 (5) TMI 904 -
CESTAT Chennai
It is his submission that the judgment of the Hon'ble Supreme Court in
the case of CCE v. Ultratech Cement Ltd., 2018 (9) G.S.T.L. 337 (S.C.)
though analysed the definition of the input services post amendment
effective from April 2008, it was held that the benefit of credit was
available beyond the place of removal only upto 31.03.2008. The Board
vide its Circular no. 1065/4/2018-CX., dated 8.6.2018 clarified that
CENVAT credit of GTA services after the amendment shall be available
only upto the place of removal. The period of dispute in the present case
being prior to amendment, the Appellant is eligible to the credit of GTA
services for outward transportation.
2.1 Further, he brought to our notice that on the very issue for other
unit of the Appellant, the adjudicating authority,
BelapurCommissionerate, by relying on the judgment in the case of
Vasavadatta (supra) has sanctioned the refund of the credit availed on
GTA service for outward transportation and reversed subsequently.
3. On the other hand, Shri Rajesh Nathan, Learned Assistant
Commissioner (AR) appearing on behalf of the Revenue reiterates the
finding of the impugned order.
4. We have carefully considered the submissions made by both sides
and perused the records. We find that this second round of the litigation
and dispute relates to admissibility of CENVAT credit on the GTA services
availed for outward transportation of goods manufactured by the
Appellant from their factory gate till customers premises. The Appellant
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is clearing the manufactured goods at ex-factory price and provides
additional service of delivering the said goods to customers premise, for
which the Appellant is availing GTA services and service tax on such
services was paid under RCM. The definition of 'input service' as it stood
prior to and after 1.4.2008 is reproduced as under:
"Prior to 01.04.2008:
(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..............
W.e.f. 01.04.2008:
(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 upto the place of removal,
and includes.............."
From the above definition, it can be seen that prior to 1.4.2008, in sub-
clause (ii) any service 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, is covered under
the definition of input service. However, post 01.04.2008, only those
services which are used upto the place of removal were covered within
ambit of input services. The period involved in the present appeal is prior
to 01.04.2008.
5. The adjudicating authority and the appellate authority denied the
CENVAT credit on the ground that the sale was not on FOR basis and the
sale was at factory gate. The price on which the excise duty was paid did
not include the cost of transportation.
5|Page E/10984/2021
6. The issue is considered by various judgements, which are
discussed hereunder, which clearly hold that, prior to 01.04.2008, the
outward transportation services were specifically covered by main body
of the definition of input service, which provides for means part of the
definition and it is not necessary to examine the inclusive part of the
definition of input services.
7. The Hon'ble Apex Court in Andhra Sugars Limited-2018 (10) GSTL
12, in paragraph 8 clearly holds that "once it is accepted that the place of
removal is the factory premises of the assesee, the outward
transportation from the said place would clearly amount to input
services. That place can be warehouse of the manufacturer or it can be
customer‟s place if from the place of removal the goods are directly
dispatched to the place of the customer. One such outbound
transportation from the place of removal gets covered by the definition of
input service."
8. In Commissioner of Central Excise, Belgaum v. M/s. Vasavadatta
Cements Ltd., 2018 (11) G.S.T.L. 3 (S.C.), it is held that:
"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 upto 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
6|Page E/10984/2021
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‟."
9. In view of the aforesaid discussion we hold that the appeals are
bereft of any merit and are accordingly dismissed."
8. In Commissioner v. Parth Poly WoovenPvt. Ltd., 2012 (25) S.T.R. 4
(Guj.), the Hon'ble Gujarat High Court held thus:
"18. Bearing in mind the above judicial pronouncements, if we
revert back to the definition of the term „input service‟, as already
noticed, it is coined in the phraseology of "means and includes".
Portion of the definition which goes with the expression means, is
any service 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. This definition itself is
wide in its expression and includes large number of services used
by the manufacturer. Such service may have been used either
directly or even indirectly. To qualify for input service, such service
should have been used for the manufacture of the final products or
in relation to manufacture of final product or even in clearance of
the final product from the place of removal. The expression „in
relation to manufacture‟ is wider than „for the purpose of
manufacture‟. The words „and clearance of the final products from
the place of removal‟ are also significant. Means part of the
definition has not limited the services only upto the place of
removal, but covers services used by the manufacturer for the
clearance of the final products even from the place of removal. It
can thus be seen that main body of the definition of term „input
service‟ is wide and expansive and covers variety of services
utilized by the manufacturer. By no stretch of imagination can it be
stated that outward transportation service would not be a service
used by the manufacturer for clearance of final products from the
place of removal.
19. When we hold that outward transportation would be an input
service as covered in the expression „means‟ part of the definition,
it would be difficult to exclude such service on the basis of any
interpretation that may be offered of the later portion of the
definition which is couched in the expression „includes‟. As already
observed, it is held in several decisions that the expression
„includes‟ cannot be used to oust any activity from the main body
of the definition if it is otherwise covered by the expression
„means‟. In other words, the expression 'includes' followed by
'means' in any definition is generally understood to be
expanding the definition of the term to make it exhaustive,
but in no manner can the expression 'includes' be utilized to
limit the scope of definition provided in the main body of the
definition. To our mind this was also not the intention of the
Legislature in the present case."
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9. In Commr., CGST & C. Ex., Vadodara-II Vs. Gujarat Guardian
Limited, 2018 (12) G.S.T.L. 300 (Guj.), the Hon'ble Gujarat High Court
held thus:
"2. It is not in dispute that the issues arising in the present Tax
Appeal are squarely covered by the judgment in case of
Commissioner of C. Ex. & Customs v. Parth Poly WoovenPvt. Ltd.
reported in 2012 (25) S.T.R. 4 in which it was observed as under:
18. Bearing in mind the above judicial pronouncements, if we
revert back to the definition of the term „input service‟, as
already noticed, it is coined in the phraseology of "means and
includes". Portion of the definition which goes with the
expression means, is any service 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. This definition itself is wide in its
expression and includes large number of services used by the
manufacturer. Such service may have been used either directly
or even indirectly. To qualify for input service, such service
should have been used for the manufacture of the final
products or in relation to manufacture of final product or even
in clearance of the final product from the place of removal. The
expression „in relation to manufacture‟ is wider than „for the
purpose of manufacture‟. The words „and clearance of the final
products from the place of removal‟ are also significant. Means
part of the definition has not limited the services only upto the
place of removal, but covers services used by the manufacturer
for the clearance of the final products even from the place of
removal. It can thus be seen that main body of the definition of
term „input service‟ is wide and expansive and covers variety of
services utilized by the manufacturer. By no stretch of
imagination can it be stated that outward transportation service
would not be a service used by the manufacturer for clearance
of final products from the place of removal.
19. When we hold that outward transportation would be an
input service as covered in the expression „means‟ part of the
definition, it would be difficult to exclude such service on the
basis of any interpretation that may be offered of the later
portion of the definition which is couched in the expression
„includes‟. As already observed, it is held in several decisions
that the expression „includes‟ cannot be used to oust any
activity from the main body of the definition if it is otherwise
covered by the expression „means‟. In other words, the
expression 'includes' followed by 'means' in any
definition is generally understood to be expanding the
definition of the term to make it exhaustive, but in no
manner can the expression 'includes' be utilized to limit
the scope of definition provided in the main body of the
definition. To our mind this was also not the intention of the
Legislature in the present case.
8|Page E/10984/2021
20. There, of course, are certain areas which still remain to be
cleared. It was vehemently contended before us by the counsel
for the Revenue that later portion of the definition which
provides for the inclusion clause limits the outward
transportation service up to the place of removal. That being
so, according to them, the outward transport service utilized by
the manufacturer beyond the place of removal would not qualify
as an input service within the definition of Rule 2(1). We may
only notice two things in this regard. Firstly, in our view, when
we find that outward transport service is covered by the main
body of the definition which provides for means part, as
specifically including any service directly or indirectly in or in
relation to manufacture of final product or clearance of final
product from the place of removal, no interpretation of the later
part of the definition would permit us to exclude such a service
from the sweep of the definition. Secondly, we notice that the
definition of the term „input service‟ came to be amended with
effect from 1-4-2008 and instead of words "clearance of final
products from the place of removal", the words "clearance of
final products upto the place of removal" came to be
substituted. What would be the position if the case had arisen
after 1-4-2008 is a situation we are not confronted with. We,
therefore, refrain from making any observations in this regard.
We, however, cannot help noticing the change in the statutory
provisions which is at the heart of the entire controversy.
Insofar as the cases on hand are concerned, the statutory
provisions cover the service used by the manufacturer in
relation to the manufacture of the final products or even the
clearance of final products from the place of removal.
22. Be that as it may, we are of the opinion that the outward
transport service used by the manufacturer for transportation of
finished goods from the place of removal upto the premises of
the purchaser is covered within the definition of "input service"
provided in Rule 2(1) of the Cenvat Credit Rules, 2004."
3. In the result, Tax Appeal is dismissed."
10. We also find that the Hon'ble Supreme Court in the case of
Ultratech Cement Ltd., 2018 (9) G.S.T.L. 337 (S.C.) has held that the
benefit which was admissible even beyond the place of removal was post
amendment restricted upto the place of removal. The relevant para is as
under:
"7. It may be relevant to point out here that 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. This stands finally decided in Civil Appeal
No. 11710 of 2016 (Commissioner of Central Excise Belgaum v. M/s.
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Vasavadatta Cements Ltd.) vide judgment dated January 17, 2018.
However, vide amendment carried out in the aforesaid Rules in the
year 2008, which became effective from March 1, 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. Whereas the word „from‟ is the indicator
of starting point, the expression „upto‟ signifies the terminating
point, putting an end to the transport journey."
11. In view of above judgments, we hold that the Appellant is entitled
to CENVAT credit of service tax paid under RCM for transportation of
goods from its factory to customer's premises. No case is made out by
the revenue for denial of the CENVAT Credit on the ground that goods
were not sold on FOR basis.
12. As regards the inclusion of the cost of transportation in the
assessable value of the goods cleared by the Appellant, we find that this
very issue was considered by the Larger Bench's in the case of ABB
Limited - 2009 (15) STR 23 (Tri.-LB), which was ultimately upheld by the
Hon'ble Supreme Court in case of Vasavdatta (Supra), and in which it is
held as under:
"18. For admissibility to credit for outward transportation there is
no requirement that the cost of freight should enter into the
transaction value of the manufactured goods. According to the
department, since the cost of outward transportation does not form
part of the transaction value of the manufactured goods as defined
in Section 4 of the Central Excise Act, 1944, any service tax paid for
the outward transportation of goods from place of removal cannot
be allowed as credit to the manufacturer, although, the question of
denial of credit does not arise if the cost of freight is included in the
transaction value. However, this stand is not tenable. In other
words, credit is not to be automatically disallowed in those cases
where the freight cost does not form part of the transaction
value.............
........................
22. There is an additional reason for holding that CENVAT credit is admissible on services even if the value thereof is not part of the value subjected to duty. This is because the interpretation of the expression "input services" cannot fluctuate with the change in the 10 | P a g e E/10984/2021 definition of "value" in Section 4 of the Central Excise Act and cannot vary depending on whether the goods are levied to duty under Section 4A of the Central Excise Act or tariff value under Section 3(2) of the Central Excise Act or the product attract specific rate of duty.............."
13. Following the decision of the larger bench in ABB Limited, we hold that non-inclusion of the costs of the transportation in assessable value is no ground to deny the CENVAT credit.
14. We further find that demand in the present case relates to the period January, 2005 to June, 2007 and the show cause notice was issued on 02.12.2009. The entire demand is beyond normal period of one year. The issue involved is of interpretation of Cenvat Credit Rules and on this issue there are number of judgements. In these circumstances it cannot be said that the Appellant had a mala fide intention to evade the excise duty by taking the wrong credit. We do not find any suppression of fact or misstatement on the part of the Appellant. Thus, we are of the opinion that extended period cannot apply in the facts of the present case.
15. We accordingly set aside the impugned order both on merits and on limitation. The Appeal is allowed with consequential relief, if any.
(Pronounced in the open court on 05.02.2024) (RAMESH NAIR) MEMBER (JUDICIAL) (RAJU) MEMBER (TECHNICAL) Neha