"1\nREPORTABLE\nIN THE SUPREME COURT OF INDIA\nCIVIL APPELLATE JURISDICTION\nCIVIL APPEAL NO. 11261 OF 2016\nCOMMISSIONER OF CENTRAL EXCISE \nSERVICE TAX \n.....APPELLANT(S)\nVERSUS\nULTRA TECH CEMENT LTD.\n.....RESPONDENT(S)\nJ U D G M E N T\nA.K. SIKRI, J.\nThe core issue involved in the present case is with regard to the\nadmissibility or otherwise of the Cenvat Credit on Goods Transport\nAgency service availed for transport of goods from the place of removal\nto buyer’s premises. This issue has arisen in the following factual\nbackground:\nThe respondent M/s. Ultratech Cement Ltd. (hereinafter referred to\nas the ‘assessee’) is involved in packing and clearing/forwarding of\ncement classifiable under Chapter sub heading 25232910 of Central\nExcise Tariff Act, 1985, with Central Excise Registration No.\nAAACL6442LEM014. The assessee is also availing the benefit of\nDigitally signed by\nASHWANI KUMAR\nDate: 2018.02.01\n16:44:38 IST\nReason:\nSignature Not Verified\n\n2\nCenvat Credit facility under the Cenvat Credit Rules, 2004 (‘Rules, 2004’\nfor short). The assesseeherein gets finished goods (cement) from its\nparent unit on stock transfer basis and sells the same in bulk form and\npacked bags. The assessee during the period from January, 2010 to\nJune, 2010 availed Cenvat Credit of service tax paid on outward\ntransportation of goods through a transport agency from their premises\nto the customer’s premises. According to the appellant/Revenue, the\ntransport agency service used by the assessee for transportation of their\nfinal product from their premises to customers premises cannot be\nconsidered to have been used directly or indirectly in relation to\nclearance of goods from the factory viz., place of removal in terms of\nRule 2(l) of the Rules and as such cannot be considered as input service\nto avail Cenvat credit. \nAccordingly, the Office of the Commissioner of Central Excise:\nBangalore II Commissionerate issued show cause notice dated February\n3, 2011 to the assessee inter alia stating that on scrutiny of ER-1 return\nsubmitted by the assessee for the period January, 2010 to June, 2010, it\nwas noticed that the assessee have wrongly availed the Cenvat Credit of\nService Tax paid on outward transportation of goods from the factory to\nthe Customer’s premises, inasmuch as the Goods Transport Agency\nService used for the purpose of outward transportation of the goods\nfrom factory to customer’s premises is not input service within the ambit\n\n3\nof Rule 2(l)(ii) of the Rules, 2004. It was further mentioned that the total\nCenvat Credit claimed was in the sum of Rs. 25,66,131/- and the\nassessee was called upon to show cause as to why the said amount be\nnot recovered and penalty be not imposed. The assessee submitted its\nreply to the show cause notice contesting the position contained therein.\n2) After hearing, the Adjudicating Authority passed Order-in-Original dated\nAugust 22, 2011 holding that once the final products are cleared from\nthe factory premises, extending the credit beyond the point of clearance\nof final product is not permissible under Cenvat Credit Rules and post\nclearance use of services in transport of manufactured goods cannot be\ninput service for the manufacture of final product. Further, the\nAdjudicating Authority held that CBEC vide its Circular No. 97/8/2007-ST\ndated August 23, 2007 has clarified the definition of place of removal.\nWith respect to fulfillment of requirement of Circular dated August 23,\n2007, it was held that the assessee has not produced any documentary\nevidence to prove that conditions laid down vide Circular dated August\n23, 2007 has been fulfilled. Accordingly, the Adjudicating Authority\npassed the order as under:\n“(i) Demanding the irregular Cenvat credit availed on\noutward transportation of goods amounting to\nRs.25,66,131/- under Rule 14 of Cenvat Credit Rules, 2004\nread with Section 11A of Central Excise Act, 1944;\n(ii) Demanding interest under Rule 14 of Cenvat Credit\nRules, 2004 read with Section 11AB of Central Excise Act,\n1944 read with Section 75 of the Finance Act, 1994;\n\n4\n(iii) Did not order for initiation of action under Rule 15(1) of\nCenvat Credit Rules, 2004 read with Rule 25 of Central\nExcise Rules, 2002;\n(iv) Imposed penalty of Rs.25,66,131/- under Rule 15(3) of\nCenvat Credit Rules, 2004;\n(v) Imposed penalty of Rs.1,00,000/- under Rule 25 of\nCentral Excise Rules, 2002.” \n3) Aggrieved by the Order-in-Original No. 24/2011 dated August 22, 2011,\nrespondent/assessee preferred an appeal before Commissioner\n(Appeals). The Commissioner (Appeals) vide Order-in-Appeal No.\n57/2012-CE dated March 15, 2012 allowed the appeal and set aside the\nOrder-in-Original holding that assessee is eligible for availment of\nservice tax paid on GTA service on the outward freight from the factory\nto the customers’ premises as per the Board’s Circular\n97/8/2007-Service Tax dated August 23, 2007. It was now the turn of\nthe Revenue to feel aggrieved by the order. Accordingly, appeal was\nfiled before the Customs, Excise and Service Tax Appellate Tribunal\n(CESTAT) by the Revenue which was rejected vide judgment dated May\n1, 2015. Further appeal to the High Court preferred by the assessee\nhas met the same fate as the said appeal has been dismissed by the\nHigh Court of Karnataka vide its judgment dated June 29, 2016, which is\nthe subject matter of the present appeal. \n4) As mentioned above, the assessee is involved in packing and clearing of\n\n5\ncement. It is supposed to pay the service tax on the aforesaid services.\nAt the same time, it is entitled to avail the benefit of Cenvat Credit in\nrespect of any input service tax paid. In the instant case, input service\ntax was also paid on the outward transportation of the goods from\nfactory to the customer’s premises of which the assessee claimed the\ncredit. The question is as to whether it can be treated as ‘input service’.\n5) ‘Input service’ is defined in Rule 2(l) of the Rules, 2004 which reads as\nunder:\n“2(l) “input service” means any service:-\n(i)\n Used by a provider of taxable service for providing an\noutput services; or\n(ii)\nUsed by the manufacturer, whether directly or\nindirectly, in or in relation to the manufacture of final\nproducts and clearance of final products upto the\nplace of removal and includes services used in\nrelation to setting up, modernization, renovation or\nrepairs of a factory, premises of provider of output\nservice or an office relating to such factory or\npremises, advertisement or sales promotion, market\nresearch, storage upto the place of removal,\nprocurement of inputs, activities relating to business,\nsuch as accounting, auditing, financing recruitment\nand quality control, coaching and training, computer\nnetworking, credit rating, share registry, and security,\ninward transportation of inputs or capital goods and\noutward transportation upto the place of removal;”\n \n6) It is an admitted position that the instant case does not fall in sub-clause\n(i) and the issue is to be decided on the application of sub-clause (ii).\nReading of the aforesaid provision makes it clear that those services are\n\n6\nincluded which are used by the manufacturer, whether directly or\nindirectly, in or in relation to the manufacture of final products and\nclearance of final products ‘upto the place of removal’.\n7) It may be relevant to point out here that the original definition of ‘input\nservice’ contained in Rule 2(l) of the Rules, 2004 used the expression\n‘from the place of removal’. As per the said definition, service used by\nthe manufacturer of clearance of final products ‘from the place of\nremoval’ to the warehouse or customer’s place etc., was exigible for\nCenvat Credit. This stands finally decided in Civil Appeal No. 11710 of\n2016 (Commissioner of Central Excise Belgaum v. M/s.\nVasavadatta Cements Ltd.) vide judgment dated January 17, 2018.\nHowever, vide amendment carried out in the aforesaid Rules in the year\n2008, which became effective from March 1, 2008, the word ‘from’ is\nreplaced by the word ‘upto’. Thus, it is only ‘upto the place of removal’\nthat service is treated as input service. This amendment has changed\nthe entire scenario. The benefit which was admissible even beyond the\nplace of removal now gets terminated at the place of removal and doors\nto the cenvat credit of input tax paid gets closed at that place. This\ncredit cannot travel therefrom. It becomes clear from the bare reading of\nthis amended Rule, which applies to the period in question that the\nGoods Transport Agency service used for the purpose of outward\ntransportation of goods, i.e. from the factory to customer’s premises, is\n\n7\nnot covered within the ambit of Rule 2(l)(i) of Rules, 2004. Whereas the\nword ‘from’ is the indicator of starting point, the expression ‘upto’\nsignifies the terminating point, putting an end to the transport journey.\nWe, therefore, find that the Adjudicating Authority was right in\ninterpreting Rule 2(l) in the following manner:\n“… The input service has been defined to mean any service\nused by the manufacturer whether directly or indirectly and\nalso includes, interalia, services used in relation to inward\ntransportation of inputs or export goods and outward\ntransportation upto the place of removal. The two clauses in\nthe definition of ‘input services’ take care to circumscribe\ninput credit by stating that service used in relation to the\nclearance from the place of removal and service used for\noutward transportation upto the place of removal are to be\ntreated as input service. The first clause does not mention\ntransport service in particular. The second clause restricts\ntransport service credit upto the place of removal. When\nthese two clauses are read together, it becomes clear that\ntransport services credit cannot go beyond transport upto\nthe place of removal. The two clauses, the one dealing with\ngeneral provision and other dealing with a specific item, are\nnot to be read disjunctively so as to bring about conflict to\ndefeat the laws’ scheme. The purpose of interpretation is to\nfind harmony and reconciliation among the various\nprovisions.\n15. Credit availability is in regard to ‘inputs’. The credit\ncovers duty paid on input materials as well as tax paid on\nservices, used in or in relation to the manufacture of the\n‘final product’. The final products, manufactured by the\nassessee in their factory premises and once the final\nproducts are fully manufactured and cleared from the factory\npremises, the question of utilization of service does not arise\nas such services cannot be considered as used in relation to\nthe manufacture of the final product. Therefore, extending\nthe credit beyond the point of removal of the final product on\npayment of duty would be contrary to the scheme of Cenvat\nCredit Rules. The main clause in the definition states that\nthe service in regard to which credit of tax is sought, should\nbe used in or in relation to clearance of the final products\nfrom the place of removal. The definition of input services\n\n8\nshould be read as a whole and should not be fragmented in\norder to avail ineligible credit. Once the clearances have\ntaken place, the question of granting input service stage\ncredit does not arise. Transportation is an entirely different\nactivity from manufacture and this position remains settled\nby the judgment of Honorable Supreme Court in the cases\nof Bombay Tyre International 1983 (14) ELT, Indian Oxygen\nLtd. 1988 (36) ELT 723 SC and Baroda Electric Meters 1997\n(94) ELT 13 SC. The post removal transport of\nmanufactured goods is not an input for the manufacturer.\nSimilarly, in the case of M/s. Ultratech Cements Ltd. v. CCE,\nBhatnagar 2007 (6) STR 364 (Tri), it was held that after the\nfinal products are cleared from the place of removal, there\nwill be no scope of subsequent use of service to be treated\nas input. The above observations and views explain the\nscope of relevant provisions clearly, correctly and in\naccordance with the legal provisions.”\n \n8) The aforesaid order of the Adjudicating Authority was upset by the\nCommissioner (Appeals) principally on the ground that the Board in its\nCircular dated August 23, 2007 had clarified the definition of ‘place of\nremoval’ and the three conditions contained therein stood satisfied\ninsofar as the case of the respondent is concerned, i.e. (i) regarding\nownership of the goods till the delivery of the goods at the purchaser’s\ndoor step; (ii) seller bearing the risk of or loss or damage to the goods\nduring transit to the destination and; (iii) freight charges to be integral\npart of the price of the goods. This approach of the Commissioner\n(Appeals) has been approved by the CESTAT as well as by the High\nCourt. This was the main argument advanced by the learned counsel\nfor the respondent supporting the judgment of the High Court.\n9) We are afraid that the aforesaid approach of the Courts below is clearly\n\n9\nuntenable for the following reasons:\n10)\nIn the first instance, it needs to be kept in mind that Board’s\nCircular dated August 23, 2007 was issued in clarification of the\ndefinition of ‘input service’ as existed on that date i.e. it related to\nunamended definition. Relevant portion of the said circular is as under:\n“ISSUE: Up to what stage a manufacturer/consignor can\ntake credit on the service tax paid on goods transport by\nroad?\nCOMMENTS: This issue has been examined in great detail\nby the CESTAT in the case of M/s Gujarat Ambuja\nCements Ltd. vs CCE, Ludhiana [2007 (6) STR 249 Tri-D].\nIn this case, CESTAT has made the following\nobservations:-\n“the post sale transport of manufactured goods is not an\ninput for the manufacturer/consignor. The two clauses in the\ndefinition of ‘input services’ take care to circumscribe input\ncredit by stating that service used in relation to the clearance\nfrom the place of removal and service used for outward\ntransportation upto the place of removal are to be treated as\ninput service. The first clause does not mention transport\nservice in particular. The second clause restricts transport\nservice credit upto the place of removal. When these two\nclauses are read together, it becomes clear that transport\nservice credit cannot go beyond transport upto the place of\nremoval. The two clauses, the one dealing with general\nprovision and other dealing with a specific item, are not to be\nread disjunctively so as to bring about conflict to defeat the\nlaws’ scheme. The purpose of interpretation is to find\nharmony and reconciliation among the various provisions”.\nSimilarly, in the case of M/s Ultratech Cements Ltd vs CCE\nBhavnagar 2007-TOIL-429-CESTAT-AHM, it was held that\nafter the final products are cleared from the place of\nremoval, there will be no scope of subsequent use of service\nto be treated as input. The above observations and views\nexplain the scope of the relevant provisions clearly, correctly\nand in accordance with the legal provisions. In conclusion, a\nmanufacturer / consignor can take credit on the service tax\npaid on outward transport of goods up to the place of\n\n10\nremoval and not beyond that.\n8.2 In this connection, the phrase ‘place of removal’ needs\ndetermination taking into account the facts of an individual\ncase and the applicable provisions. The phrase ‘place of\nremoval’ has not been defined in CENVAT Credit Rules. In\nterms of sub-rule (t) of rule 2 of the said rules, if any words\nor expressions are used in the CENVAT Credit Rules, 2004\nand are not defined therein but are defined in the Central\nExcise Act, 1944 or the Finance Act, 1994, they shall have\nthe same meaning for the CENVAT Credit Rules as\nassigned to them in those Acts. The phrase ‘place of\nremoval’ is defined under section 4 of the Central Excise Act,\n1944. It states that,-\n“place of removal” means-\n(i) a factory or any other place or premises of\nproduction or manufacture of the excisable goods ;\n(ii) a warehouse or any other place or premises wherein\nthe excisable goods have been permitted to be stored\nwithout payment of duty ;\n(iii) a depot, premises of a consignment agent or any other\nplace or premises from where the excisable goods are to be\nsold after their clearance from the factory;\nfrom where such goods are removed.”\nIt is, therefore, clear that for a manufacturer /consignor,\nthe eligibility to avail credit of the service tax paid on the\ntransportation during removal of excisable goods\nwould depend upon the place of removal as per the\ndefinition. In case of a factory gate sale, sale from a\nnon-duty paid warehouse, or from a duty paid depot (from\nwhere the excisable goods are sold, after their clearance\nfrom the factory), the determination of the ‘place of removal’\ndoes not pose much problem. However, there may be\nsituations where the manufacturer /consignor may claim that\nthe sale has taken place at the destination point because in\nterms of the sale contract /agreement (i) the ownership of\ngoods and the property in the goods remained with the\nseller of the goods till the delivery of the goods in acceptable\ncondition to the purchaser at his door step; (ii) the seller\nbore the risk of loss of or damage to the goods during transit\nto the destination; and (iii) the freight charges were an\nintegral part of the price of goods. In such cases, the credit\nof the service tax paid on the transportation up to such place\n\n11\nof sale would be admissible if it can be established by the\nclaimant of such credit that the sale and the transfer of\nproperty in goods (in terms of the definition as under section\n2 of the Central Excise Act, 1944 as also in terms of the\nprovisions under the Sale of Goods Act, 1930) occurred at\nthe said place.”\n \n11)\nAs can be seen from the reading of the aforesaid portion of the\ncircular, the issue was examined after keeping in mind judgments of\nCESTAT in Gujarat Ambuja Cement Ltd. and M/s. Ultratech Cement\nLtd. Those judgments, obviously, dealt with unamended Rule 2(l) of\nRules, 2004. The three conditions which were mentioned explaining the\n‘place of removal’ as defined under Section 4 of the Act, there is no\nquarrel upto this stage. However, the important aspect of the matter is\nthat Cenvat Credit is permissible in respect of ‘input service’ and the\nCircular relates to the unamended regime. Therefore, it cannot be\napplied after amendment in the definition of ‘input service’ which brought\nabout a total change. Now, the definition of ‘place of removal’ and the\nconditions which are to be satisfied have to be in the context of ‘upto’ the\nplace of removal. It is this amendment which has made the entire\ndifference. That aspect is not dealt with in the said Board’s circular, nor\nit could be. \n12)\nSecondly, if such a circular is made applicable even in respect of\npost amendment cases, it would be violative of Rule 2(l) of Rules, 2004\nand such a situation cannot be countenanced.\n\n12\n13)\nThe upshot of the aforesaid discussion would be to hold that\nCenvat Credit on goods transport agency service availed for transport of\ngoods from place of removal to buyer’s premises was not admissible to\nthe respondent. Accordingly, this appeal is allowed, judgment of the\nHigh Court is set aside and the Order-in-Original dated August 22, 2011\nof the Assessing Officer is restored. \n.............................................J.\n(A.K. SIKRI)\n.............................................J.\n(ASHOK BHUSHAN)\nNEW DELHI;\nFEBRUARY 01, 2018.\n"