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September 2011

Outward transportation from place of removal — Covered under the scope of definition of input service prior to 1-4-2008 — Cenvat credit available. Intention of Legislature manifest — Definition of input service amended on 1-3-2008 to include only the charges incurred up to the place of removal.

By Puloma Dalal
Jayesh Gogri
Chartered Accountants
Reading Time 2 mins
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(2011) 23 STR 97 (Kar.) — Commissioner of Central Excise & S.T  v.  ABB Limited.

Facts:

The Revenue was in appeal against the order passed by the Tribunal allowing the manufacturerassessee to take CENVAT credit on services availed for outward transportation of final products from the place of removal. Prior to 1-3-2008, definition of input service [Rule 2(l) of the CENVAT Credit Rules, 2004] covered all services used by manufacturer in the manufacture of final products and clearance from place of removal. The definition of ‘input service’ contains both the word ‘means’ and ‘includes’ but it does not use the phrase ‘means and includes’. The portion of the definition to which the word ‘means’ applies has to be construed restrictively as it is exhaustive part of the definition. The Tribunal observed that the words ‘from place of removal’ is covered in the ‘means’ portion of definition. Since the particular service of outward transportation is included in the exhaustive portion of the definition, it is not necessary to interpret inclusive portion of the same rule to include the said service again. Finding on coverage of service under ‘inclusive’ portion of definition was needless. The definition, however, was amended on 1-3-2008 to cover only services used by the manufacturer in relation to the manufacture of final products and clearance of final products, up to the place of removal. Therefore, the intention of the Legislature was clear. Till such amendment, the words ‘clearance from the place of removal’ included transportation charges from the place of removal till it reached the final destination.

Held:

After observing the contentions of the assessee, contentions of the Revenue, CESTAT observations, various provisions and judicial pronouncements, the High Court dismissed the appeal filed by the Revenue and allowed CENVAT credit of service tax paid by the assessee on outward transportation from place of removal.

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