It might be clichéd to say that certainty is one of the hallmarks of tax administration but nevertheless its importance cannot be under emphasised.
With increasingly difficult business environment, focus on tax finds increasing importance in the boardrooms, and with an active tax administration seeking to garner additional revenues, tax issues often make it to the headlines.
There is perhaps a sense of unease with what is becoming an increasing trend—judicial decisions over ruling the ‘settled’ principles laid down over a period of time. The uncertainty created by varying interpretations would lead to increase in litigation for issues which the companies may be dealing with basis other judicial precedents which is certainly not a desirable outcome.
In a recent decision in the case Commissioner of Central Excise Vs Vesuvious India Ltd, the Calcutta High Court held that outward transportation for clearance of goods from the factory to buyer’s premises will not qualify as an input service and therefore service tax paid for the same would not be eligible for claiming the Cenvat credit.
The High Court has taken cognisance of other decisions which were given by the Karnataka High Court in the case Commissioner of Central Excise vs ABB Ltd and Gujarat High Court in the case Commissioner of Central Excise vs Parth Poly Wooven Pvt Ltd—which were in favour of the assessee—but has taken a different view denying the benefit of Cenvat credit.
Before analysing the decision in detail, let us analyse the definition of ‘input service’ which is the subject matter of the dispute.
Rule 2(t) of Cenvat Credit Rules defines ‘input service’ and has two limbs—‘means’ and ‘includes’.
The ‘means’ portion of the definition covers any service used by the manufacturer, whether directly or indirectly, in or in relation to the manufacture of the final product and clearance of final product from the place of removal.
The above definition was amended on April 1, 2008, and now ‘input service’ would be any service used by the manufacturer for clearance of final products upto the place of removal. Thus, the word ‘from’ has been substituted by ‘upto’ in the definition.
The ‘includes’ portion of the definition specifies that output transportation upto the place of removal is also an ‘input service’ which remains unamended.
Section 4(3)(c) of the Central Excise Act defines place of removal as any factory, depot or any other place from where the excisable goods are sold.
In ABB Ltd’s decision, the Karnataka