Customs, Excise and Gold Tribunal - Tamil Nadu
India Japan Lighting Pvt. Ltd. vs Commissioner Of C. Ex. on 13 July, 2007
ORDER P.G. Chacko, Member (J)
1. When the stay application of M/s. India Japan Lighting Pvt. Ltd. (appellants in appeal No.E/323/2007) arose for consideration of the Bench on 5-6-2007, it was pointed out by the counsel for the applicant that a similar application of M/s. Saint Gobain Glass (I) Ltd. (appellants in appeal No. 8E/345/2007) was coming up before the Bench on the next day. It was also pointed out that the quantum of demand on M/s. Saint Gobain Glass (I) Ltd. (SGGL, for short) was over Rs. 1.7 crores, many times the duty demanded from M/s. India Japan Lighting (P) Ltd. [IJLL, for short] Counsel also pointed out that the same issue was involved in both the cases. Having found these submissions to be factually correct, we heard both sides on the stay application of M/s. IJLL on 5-6-2007 and posted the matter to the next day for orders. On 6-6-2007, we heard both sides on the stay application of M/s. SGGL. Both Sr. Advocate for the applicant and Ld. SDR for the Revenue argued extensively on the substantive issue which arose in the case, whereupon we felt that the appeal itself could be taken up along with the appeal of M/s. IJLL for hearing on the same day, to which both sides agreed. Accordingly, after dispensing with pre-deposit, we took up both the appeals.
2. M/s. IJLL are manufacturers of lighting equipments for automobiles and these equipments are supplied as Original Equipments to customers like M/s. Maruti Udyog Ltd., M/s. Telco Ltd., M/s. Mahindra & Mahindra etc. They availed CENVAT credit on inputs, capital goods and input services and utilized the same for payment of duty on the said Original Equipments (final products). During the period Nov'04 to Sept'05, IJLL availed credit of service tax paid on freight in respect of transportation of their final products from factory to buyers' premises, They utilized this credit, which they called 'input service tax credit', for payment of duty (on final products) which was determined on the basis of the price at factory gate. Obviously, the outward transportation of the final products from the factory gate to the customers' premises was treated as "input service" as defined under Rule 2(1) of the CENVAT Credit Rules, 2004 [CCR 2004, for short]. The department objected to this and issued a show-cause notice for (a) recovery of service tax credit amount of Rs.11,40,637/- (along with Education Cess) under Rule 14 of the CCR 2004 read with Section 11A of the Central Excise Act (b) recovery of interest on the amounts of duty and cess under Section 11AB of the Act and (c) imposition of penalty under Rule 15(3) of the CCR 2004. What was mainly sought to be recovered from IJLL was the service tax credit availed by them on the freight incurred in respect of outward transportation of their final products from factory to customers' premises and utilized for payment of duty during Nov'04 to Sept'05. In their reply to the SCN, the party contested the demand by interpreting the provisions of Rule 2(1) of the CCR 2004 in their own way. They argued that the expression "clearance" used in the definition of "input service" would very much include within its ambit transportation of goods from factory to the customers' premises also. They interpreted the expression "in relation to" occurring in the definition of "input service", taking aid from the Supreme Court's judgment in Doypack Systems (Pvt) Ltd. v. UOI , and contended that the transportation of the final products from factory to customers' premises was a service used "in relation to" clearance of the said goods from the place of removal (factory). In this manner, they claimed to be entitled to the CENVAT credit in question. Rejecting these arguments, the original authority construed the above expressions differently and confirmed the demand of CENVAT credit amount (along with cess) against the assessee, demanded interest thereon and imposed a penalty of Rs. 10,000/-. The appeal filed by M/s. IJLL against the decision of the original authority was rejected on merits by the Commissioner (Appeals). M/s. IJLL's appeal before us is directed against the appellate Commissioner's order.
3. A similar dispute arose between M/s. SGGL and the department for the period from June'05 to Sept'06. M/s. SGGL are manufacturers of glass. They sell a major potion of their products to customers directly and the rest is cleared to their depot. They are also availing Cenvat credit on inputs, capital goods and input services under the CCR 2004. Credit of the service tax paid on freight incurred for the outward transportation of the final products from factory to customers' premises was availed and utilized for payment of duty on final products during the above period. As in the case of IJLL, this duty was determined on the basis of the price at factory gate, which did not include the above freight. In a SCN dated 27-11-2006, the department sought to recover the above credit amounting to Rs. 1,73,53,490/- along with Education Cess from M/s. SGGL for the above period as also to impose penalty on them. The proposals were contested. In adjudication of the dispute, the Commissioner confirmed, the above demand against the assessee under Section 11A of the Central Excise Act, along with interest under Section 11AB of the Act and imposed on them penalty equal to tax + cess under Section 11AC of the Act. M/s. SGGL's appeal is against the Commissioner's decision.
4. M/s. IJJL and M/s. SGGL (hereinafter referred to as 'appellants' or 'assessees' also) had, by paying freight themselves or through agents for transportation of their final products by road in goods carriage from factory to buyers' premises, assumed the status of "person liable for paying service tax" on such freight by virtue of Rule 2(1)(d)(v) of the Service Tax Rules, 1994. They had paid the tax also, for the respective periods. The issue which arises for consideration is whether the assessees were entitled under the CCR 2004 to avail credit of service tax so paid on the freight incurred for transportation of their final products from factory to customers' premises during the respective periods and to utilize such credit in payment of duty of excise on the final products. If such transportation (Goods Transport Service) can be brought within the ambit of the definition of "input service" under Rule 2(1) of the CCR 2004, the assessees would be entitled to the above credit. The definition of "input service" reads as follows :-(1) "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.
The assessees are manufacturers of excisable goods and not service providers. Therefore, we have to determine whether the goods transport service in question is covered by the second part of the above definition, i.e., Rule 2(1)(ii). There is no dispute with regard to "place of removal". Both sides have adopted the definition of" place of removal" given under Section 4(3)(c) of the Central Excise Act and, accordingly, the place of removal, in both the cases before us, is the factory. Ld. Sr. Advocate argued that the Goods Transport Service was used by the appellants in or in relation to clearance of final products from factory to customers' premises. Relying on P. Ramanatha Aiyar's ADVANCED LAW LEXICON, Govt. of India's decision reported in 1982 (10) E.L.T. 517 and Tribunal's decision reported in 1985 (21) E.L.T. 596, he equated "clearance" to "removal" and "removal" to "transportation" and argued that the outward transportation of the final products from factory to customers' premises fell within the ambit of "clearance of final products from the place of removal" and should be held to have been used in the clearance of final products from the place of removal. Alternatively, it could be held to have been used in relation to the clearance of final products from the place of removal. In this connection, ld. counsel referred to the meaning of the expression "in relation to" as explained by the Apex Court in Doypack Systems case. He also relied on the Tribunal's decision in Commissioner v. CKP Mandal 2006 (3) S.T.R. 449 (T), wherein the same expression occurring under Section 65(105)(m) of the Finance Act, 1994 was considered. Ld. counsel argued that, if, in construing a taxing statute, any doubt arose, it must be resolved in favour of the tax payer. In this connection, he relied on the Apex Court's judgment in Polestar Electronic (Pvt.) Ltd. v. Addl. Commissioner of Sales Tax [1978] 41 STC 409 (SC). He added that MODVAT/CENVAT provisions being beneficial legislation should be liberally interpreted. While referring to the relevant provisions of the CCR 2004, ld. counsel sought to contrast "input service" with "input" and "input service tax credit" with "input duty credit". He pointed out that the benefit of input service tax credit had wider ambit inasmuch as it was available to a manufacturer of final product not only in respect of services used in or in relation to the manufacture of the final product but also in respect of services used in or in relation to clearance of the final product from the place of removal. He argued that the word "from" preceding the expression "the place of removal" in the definition of "input service" indicated that "clearance" included outward transportation of final product from the place of removal. Ld. counsel claimed that a different interpretation of Rule 2(1)(ii) would be contrary to the legislative intent. Further, relying on the Supreme Court's decision in Black Diamond Beverages and Anr. v. Commercial Tax Officer , he argued that the meaning of "input service" under Rule 2(1) (ii) was not restricted or otherwise affected by anything contained in the inclusive part of the definition of the said expression. He pointed out that nothing contained in the inclusive part of the definition had anything to do with clearance of final products from the place of removal.
5. Ld. counsel also placed on record a decision of the Tribunal, which supported the impugned orders, viz. Gujarat Ambuja Cements Ltd. v. Commissioner 2007 (6) S.T.R. 249 (T) : 2007 (80) RLT 8 (CESTAT-Del.), and proceeded to point out what he considered as errors of such decision. On the other hand, he relied on an order of the Commissioner of Customs & Central Excise (Appeals), Indore viz. Order-in-Appeal No. 336 & 337/2006, dated 6-11-2006, wherein CENVAT credit of service tax paid on outward freight for final product was allowed to M/s. NHK Springs India Ltd. vide 2006 (4) S.T.R. 618 (Comm. Appl.) : 2006 (204) E.L.T 189 (Comm. Appl.). He also cited a similar order passed by the Commissioner of Central Excise (Appeals), Mangalore, in the case of KTMS Engineering Pvt. Ltd.
6. Ld. SDR, at the outset, pointed out that the order passed by the Commissioner (Appeals), Indore in the case of NHK Springs India Ltd. had been set aside, on the substantive issue, by the Tribunal in CCE, Indore v. NKH Springs India Ltd. 2007 (7) S.T.R. 63 (Tri.) : 2007-TIOL-740-CESTAT-DEL. Ld. SDR also relied on Gujarat Ambuja Cements (supra). She pointed out that, in both the cases, outward transportation of final product from the place of removal was held not to be "input service" for the purpose of CENVAT credit. Ld. SDR referred to the definition of "final products" under Rule 2(h) of the CCR 2004 and argued that any "input service" for the purpose of availment of CENVAT credit by the manufacturer of final product must be one used in or in relation to the manufacture of the final product also. Goods Transport Service used by such manufacturer for delivering his goods at the customers' premises would not be "input service" because such service was not used in or in relation to the manufacture of the goods. SDR argued that it was permissible to interpret the scope of the main part of the definition of "input service", by taking aid from the inclusive part of the definition. If so interpreted, according to her, any outward transportation of inputs, capital goods or final products up to the place of removal only would fall within the ambit of the definition of "input service" under Rule 2(1)(ii) of the CCR 2004. In this case, admittedly, the factory was the place of removal and, therefore, any transportation of the finished goods out of the factory to the customers' premises would be outside the purview of the definition of "input service". Ld. SDR finally urged us to follow the view taken in Gujarat Ambuja Cements (supra) and NHK Springs India (supra) and to dismiss the appeals.
7. In his rejoinder, ld. counsel submitted that the view taken by the Tribunal in NHK Springs was not correct. According to him, the interpretation given to the provisions of the Rule 2(1) in the cases of Gujarat Ambuja Cements (supra) and NHK Springs India (supra) frustrated the scheme of the law instead of giving effect to it. He reiterated that the CENVAT credit scheme was a beneficial legislation which required to be construed liberally so as to promote its purpose.
8.1 We have given careful consideration to the submissions. It is significant that there is no dispute with regard to "place of removal" in these cases. Both sides have accepted the position that the place of removal, for the purpose of "input service" defined under Section 2(1) (sic) [Rule 2(1)] of the CCR 2004, must be identified in terms of Section 4(3)(c) of the Central Excise Act. According to this provision, "place of removal" means (i) a factory or any other place where excisable goods are manufactured; (ii) a warehouse or any other place where such goods are deposited without payment of duty as permitted by the competent authority; (iii) a depot or any other place from which the goods are to be sold after clearance from factory from where such goods have been removed. Duty of excise is a levy on manufacture and the same is collected when the goods are removed from the place of removal, which, in the present cases, is the factory. Ld. counsel has submitted that clearance is a synonym for removal. He has further argued, relying on P. Ramanatha Aiyar's ADVANCED LAW LEXICON, that "transport" also means to "remove". In this manner, ld. counsel has made an endeavour to bring outward transportation of final products from the factory to customers' premises, within the ambit of the expression "clearance" used in the definition of "input service". Counsel has also relied on an old decision of Govt. of India reported in 1982 (10) E.L.T. 517 and a similar decision of the Tribunal to buttress the point. In those cases, it had been observed that the word "clearance" had been used synonymously with "removal" throughout the Central Excise Rules, 1944. We are of the view that, where the Central Excise Act has clearly defined "place of removal" under Section 4(3) (c) thereof and this definition has been adopted into Rule 2(1) of the CCR 2004, it is not necessary to consult any Lexicon to understand the meaning of "removal". Section 4 of the Central Excise Act lays down the law of valuation of excisable goods for the purpose of levy of duty of excise. It provides that, "where the duty of excise is chargeable on any excisable goods with reference to their value, such value shall be the transaction value in a case where the goods are sold by the assessee for delivery at the time and place of removal and..." Accordingly, the assessee has to pay duty on the assessable value of the goods determined with reference to the time and place of removal. Both "place of removal" and "time of removal" are defined expressions vide Clauses (c) & (cc) of Sub-section (3) of Section 4. Place of removal is the place from where excisable goods are removed. It may be a factory (as in the present case) or a warehouse or a depot. The definition of "time of removal" reads as under:
(cc) "time of removal", in respect of the excisable goods removed from the place of removal referred to in Sub-clause (iii) of Clause (c) shall be deemed to be the time at which such goods are cleared from the factory, The definition uses the words "removed" and "cleared" in the same sense. [These words (as such or as their variants) have been used interchangeably in the CCR 2004 vide for instance, Rule 3(5), wherein the word "removed" has been used, and Rule 9(1) wherein the word "clearance" appears]. According to this definition, "time of removal" of excisable goods from the place of removal shall be deemed to be the time at which the excisable goods are cleared from the factory. Obviously, "clearance" of goods from the factory is an event happening at a definite point of time and not an activity performed over a period of time. In contradistinction, transportation is an activity occupying a period of time. Therefore, while accepting the equation between "removal" and "clearance", we reject the equation between "clearance" and "transportation". The argument that the use of the word "from" after "clearance" in Rule 2(1)(ii) is indicative of outward transportation upto customer's premises, also, does not appear to make sense. It is like saying that "departure" of a Bangalore-bound aeroplane from Chennai airport means the entire flight and its arrival at Bangalore airport. "Clearance" when used in the sense of removal will invariably be accompanied by "from" if the place of removal is mentioned in the sentence. No layman with prudence will take it in the sense of transportation, nor will he readily accept the lawman's advice to take it in that sense.
8.2 Thus, if the meaning of "clearance" in the definition of "input service" is deciphered from the relevant provisions of the Central Excise Act and the rules framed there under or from the common parlance, the only possible view is that clearance of final products from the place of removal does not include outward transportation of the goods to customers' premises. Such transportation starts from where clearance ends and cannot be held to be a service used directly or indirectly in the clearance of final products from the place of removal. This appears to be the view taken by the learned President sitting single in the case of NHK Springs (supra). In the case of Gujarat Ambuja Cements (supra), the Division Bench accepted the Revenue's argument that transportation did not come within the scope of clearance, which is not different from the view taken by us. In the result, it is held that the outward transportation of final products after their clearance from factory, in this case, is not a service used, directly or indirectly, in the clearance of the goods from the factory.
8.3 The question now arises as to whether such transportation can be said to be a service used, directly or indirectly, in relation to the clearance of the goods from the factory. This question does not appear to have been answered in Gujarat Ambuja Cements case, nor was it considered in NHK Springs case. "Input service" as defined under Rule 2(1)(ii) is any service used, directly or indirectly, in or in relation to the manufacture of final products and clearance of 'final products from the place of removal. The learned SDR has noted the conjunction used in the definition and argued that any service to qualify as input service should be shown to have been used in or in relation to both manufacture and clearance of final products. This argument cannot be accepted for at least two reasons. Firstly, manufacture and clearance are separate and different activities, one posterior to the other. A service used in or in relation to manufacture may not necessarily be used or useful for clearance. Secondly, the above argument of the DR is incon-gruent with a situation where the place of removal is not the factory. Where the place of removal of final products is, say, a depot, transportation of the goods from factory to the depot is an input service as it is used in relation to clearance of the goods from the depot. Without such transportation, the final products cannot be cleared from the depot. On the other hand, obviously, such transportation has nothing to do with the anterior process viz. "manufacture" which was completed in the factory, and hence cannot be said to be used in relation to the manufacture of the goods. Therefore, the word "and" used in Rule 2(1)(ii) has got to be understood in the disjunctive sense, which is compatible with the differences between 'manufacture' and 'clearance' as also with the definition of 'place of removal' under Section 4(3)(c) of the Central Excise Act.
8.4 Coming back to the expression "in relation to we note that this expression has been similarly used in the definition of "input" also vide Rule 2(k). According to this definition, "input" means goods (with certain exceptions) used in or in relation to the manufacture of final products, whether directly or indirectly and whether contained in the final product or not. The expression was used in the same manner under the erstwhile provisions (like Rule 57A of the Central Excise Rules, 1944) also and the same has been considered and construed by this Tribunal in a large number of cases. There was a time when lubricating oils and greases, used in plant and machinery (capital goods), were not specified as capital goods under Rule 57Q of the CER 1944 nor as inputs under Rule 57A. A doubt arose as to whether they should be considered as inputs or capital goods for MODVAT credit and this was cleared by a Larger Bench of the Tribunal [vide CCE, Meerut v. Modi Rubber Limited and Ors. ] which held that such lubricants were to be considered as inputs used in relation to the manufacture of final products. This view was taken after noting that lubrication of machinery was essential for smooth conduct of the manufacturing activity. The lubricants did not enter into the process of manufacture and therefore there was no chance of their being contained in the final product. Nevertheless, it was found, they aided the manufacturing activity by lubricating the capital goods. There are also cases in which even effluent treatment chemicals used by certain, industries were held to be inputs for Modvat credit under Rule 57A. These chemicals were also held to have been used in relation to the manufacture of final products. Whenever any goods (other than capital goods) used by a manufacturer in his factory was found to have at least a remote relation to the manufacture of final product, it was held to be input used in relation to such manufacture. The expression "indirectly" employed in the definition was understood as indicative such relation. The expression "in relation to" used in the definition of "input service" has to be understood in the same at sense as it has in the definition of "input". When it has to be determined whether a given service has been used, directly or indirectly, in relation to the clearance of final products from the place of removal, the test is whether the service has at least remotely aided the clearance of the final products or whether the clearance of the final products would have been facile in the absence of the service. Outward transportation of final products from the place of removal, being an activity posterior to the clearance of the goods, in the present case, cannot pass the test.
8.5 Had the "place of removal" of final products been other than factory for purposes of Section 4 of the Central Excise Act, the transportation of the goods out of the factory upto the place of removal would have qualified to be "input service" under Rule 2(1)(ii) for, in such a situation, transportation is anterior to clearance from the place of removal and passes the test. The clearance of final products from the place of removal (depot/warehouse) would not have been possible without their transportation up to such place from the factory. In other words, the transportation aids the clearance of the goods from the place of removal and can be said to have been used, directly or indirectly, in relation to such clearance.
8.6 The inclusive part of the definition of "input service" is an exhaustive list of services, which appears to have a bearing on the scope of the main part of the definition. Some of the listed services are of a kind used (directly or indirectly) in relation to the manufacture of final products, while others are of a kind used (directly or indirectly) in relation to the clearance of final products from the place of removal. Services relating to setting up, modernization, renovation or repairs of factory are in the first category, and so are those relating to procurement of inputs and inward transportation of inputs/capital goods. Services relating to sales promotion and market research can be identified as services of the second category, i.e., services used (directly or indirectly) in relation to the clearance of final products from the place of removal. The eye-catcher in this category is outward transportation, upto the place of removal. This expression, juxtaposed with "inward transportation of inputs or capital goods", can only mean outward transportation of final products upto the place of removal. Obviously, "inward transportation of inputs/capital goods" means transportation of these goods into the factory. "Outward" being the antonym of "inward", outward transportation can only mean transportation out of the factory. What is transported from factory to depot or warehouse (place of removal) for clearance is not input or capital goods but final product. Such transportation of final products only upto the place of removal has been recognized as "input service" under Rule 2(1) as held by the coordinate Bench in Gujarat Ambuja Cements case.
8.7 The learned Counsel's opposition to taking aid from the inclusive part of the definition is not justifiable. Neither any rule of interpretation nor any judicial authority has tabooed it. Whether to take such aid for understanding the scope of the main part of the definition will depend on the text and context of the definition. The main part of the definition of "input service" under Rule 2(1) (ii) deals with service used in the manufacture or clearance of final products as also with service used in relation to the manufacture or clearance of final products. Any service used in the manufacture or clearance of final products is easily identifiable, whereas any service used in relation to the manufacture or clearance of final product requires to be determined, for which a "relation" - whether direct or indirect, proximate or remote - has to be established between the service and manufacture or clearance, as the case may be. The services specified in the inclusive part of the definition of "input service" pertain to activities performed either in relation to manufacture of final products or in relation to clearance of such goods. They can, definitely, be of aid to the determination of the scope of the expression, "in relation to ", used in the main part of the definition. This is not to say generally that the inclusive part of the definition is expansive or restrictive. But one thing which can be said with certainty is that, insofar as transportation of final products is concerned, the inclusive part of the definition is restrictive as it permits such transportation upto the place of removal only as input service. The scope of the expression "in relation to" used in the main part of the definition of "input service" vide Rule 2(1)(ii) must be understood as circumscribed by this limiting factor as regards transportation of final products.
8.8 "In relation to" has been used as an adverbial phrase in the definition of "input service" (as well as in the definition of "input") whereas, under Section 3(1) and 4(1) of the Swadeshi Cotton Mills Company Limited (Acquisition and Transfer of undertakings) Act, 1986, considered by the Apex Court in Doypack Systems case, it was used as an adjectival phrase. The court, in the said case, found that the above provisions of law used the phrases "in relation to", "'pertaining to" and "relating to" as equivalent expressions. These expressions, found in deeming provisions, were also held to have been used in an expansive sense. The learned Senior Advocate has urged us to follow this decision of the Hon'ble Supreme Court and impart expansive meaning to the phrase "in relation to" used in Rule 2(1)(ii). This argument is also not persuasive for more than one reason, viz. (a) an expression used in a definition (which may be expansive or restrictive depending on the requirements of the scheme of the statute) cannot have the same meaning as it has when used in a deeming provision (which is per se expansive); (b) an adjectival phrase and an adverbial one are not interchangeable equivalents; (c) the General Clauses Act, 1897, has interchangeably used the phrases "in relation to" and "as respects" each intended to restrict the scope of the meaning of the word defined vide definitions of "Central Government" [Section 3(8)] and "State Government" [Section 3(60)]:
(8) "Central Government" shall,:
(a) in relation to anything done before the commencement of the Constitution, mean the Governor-General or the Governor-General in Council, as the case may be;
"(60) "State Government",:
(a) as respects anything done before the commencement of the Constitution, shall mean, in a Part A State, the Provincial Government of the corresponding Province in a Part B State, the authority or person authorized at the relevant date to exercise executive Government in the corresponding acceding State and in a Part C State, the Central Government;
Therefore, the expression "in relation to" which can be found in various grammatical situations in different legislative texts and contexts will have to be construed in a manner consistent with the scheme of the law. One has got to understand the definitions under Rule 2 of the Cenvat Credit Rules by keeping in mind the Cenvat credit scheme as a whole. Hence, in our view, there is no point in saying that the main part of the definition of "input service" has to be interpreted without reference to the inclusive part of the definition. The following observations of the Hon'ble Supreme Court in Polestar Electronic case (supra) are apposite to this context:
When the court is construing a statutory enactment, the intention of the legislature should be gathered from the language used by it and it is not permissible to the curt to speculate about the legislative intent. If the language of a statute is clear and explicit, effect must be given to it, for in such a case the words best declare the intention of the law-giver, it would not be right to refuse to place on the language of the statute the plain and natural meaning which it must bear on the ground that it produces a consequence which could not have been intended by the legislature, it is only from the language of the statute that the intention of the legislature must be gathered, for the legislature means no more and no less than what it says.
Fragmenting a statutory provision and interpreting one part thereof in isolation is anathema to the above cardinal rule of construction.
8.9 In the case of Black Diamond Beverages (supra) relied on by the learned Counsel, the apex court was examining the definition of "sale price" under Section 2(d) of the W.B. Sales Tax Act 1954. The court held that "sale price" in the main part of the provision should be given its ordinary, popular or natural meaning, unaffected by the inclusive part of the provision. We note that the main part of the above definition used plain words reflecting the popular meaning of sale price. Their lordships held that the inclusive part of the definition could not prevent the main provision from receiving its natural or popular meaning. In our view, this ruling is not applicable where the main provision defines a new term (like "input service") which has no popular meaning and might require external aid for its interpretation.
9. For the reasons recorded hereinbefore, we hold that goods transport service used by the appellants for transportation of their final products from factory to customer's premises cannot be considered to have been used, directly or indirectly, in relation to the clearance of the goods from the factory (place of removal).
10. M/s. IJLL have not contested any part of the demand on the ground of limitation. In the case of SGGL, it appears, a part of the demand raised on them is beyond the normal period of limitation. The assessee has contested this part of the demand by submitting that they had not suppressed any information and hence there was no reason to invoke the extended period of limitation. It is submitted that, in a letter dated 8-8-2005 addressed to the jurisdictional Superintendent, they had furnished material information to the department. In this connection, we note the following observations in the Id. Commissioner's order:
In the purported letter it appears that the noticee has only informed that they are paying service tax on freight amount vide TR.-6 challan in the capacity of consignor on the basis of GTA's bill & consignment note covering each transportation and are availing credit of service tax paid on freight amount from 16-6-2005. The said letter does not appear to declare that they are availing credit of service tax paid on freight amount incurred on outward transportation of finished goods from the factory to the buyers' premises. The letter only states that till 15-6-2005 freight amount was charged in the invoice & they were not availing cenvat credit and from 16-6-2005 they had started paying service tax on freight amount & are availing cenvat credit.
Ld. Commissioner has not accepted the assessee's letter dated 8-8-2005 as a disclosure of the relevant information to the department. No copy of this letter is available to us, and we have to go by the Commissioner's observations about the letter. It was very much discernible from the letter that the appellant had started paying service tax from 16-6-2005 on freight on the basis of GTA's bill and consignment note covering each transportation and started availing CENVAT credit thereon from that date. It was clear from the letter that the payment of service tax by the appellant was qua consignor. What more was required for the Commissioner to note that the letter was referring to transportation of final products? What stood in the way of scrutiny of the consignment notes by the Department to gel the relevant particulars of transportation as to where-to-where, identity of goods etc.? In our assessment, the letter provided adequate information to the Department and it cannot be said that the appellant suppressed material facts on or after 8-8-2005. Obviously, there was suppression of such facts prior to 8-8-2005. Therefore, we hold that the demand on M/s. SGGL for the period prior to 8-8-05 is sustainable under the proviso to Section 11A(1) of the Central Excise Act. The demand for the normal period is, of course, valid on merits. We set aside the demand for the remaining period as time-barred.
11. The lower authorities have also imposed penalties on the assessees. The penalty imposed on M/s. IJLL is under Rule 15(3) of the CCR 2004 and the same is on the ground of contravention of some of the provisions of the said Rules. We are of the view that, as the dispute between the party and the department was, by and large, in the nature of divergent construction of the provisions of law, it would not be just and fair to impose such a penalty on the party. But the case of SGGL is slightly different. We have already sustained the ground (suppression of facts) raised by the lower authority for recovering the wrongly availed/utilized Cenvat credit from them for a part of the period of dispute. Hence the party is prima facie liable for penalty under Section 11 AC of the Central Excise Act. Under this provision, the Commissioner imposed the maximum penalty (equal to Tax + Cess), which is extremely harsh even on his own findings.
12. In the result, the order for recovery of Cenvat credit illegally availed and utilized by M/s. IJLL, with interest thereon, is upheld, but the penalty imposed on them is set aside. The order of the Commissioner against M/s. SGGL is set aside and the case is remanded to him for requantification of demand in terms of this order and fresh consideration of the question whether the party is liable for penalty under Section 11 AC and, if so, to what extent. The said question may be addressed without regard to our observations. Needless to say, the assessee shall be given an effective opportunity of being heard also. Both the appeals are, accordingly, disposed of.