Ms. Jyoti Balasundaram, Vice President. - We have heard both sides on the issue referred to the Larger Bench viz., whether the services availed by a manufacturer for outward transportation of final products from the place of removal should be treated as an ‘Input Service’ in terms of rule 2(l)(ii) of CENVAT Credit Rules, 2004 and thereby enabling the manufacturer to take credit of the service tax paid on the value of such services? or whether ‘Input service’ should be limited only to outward transportation upto the place of removal in terms of the inclusive definition as held in Gujarat Ambuja Cements Ltd. v. CCE [2007] 8 STT 122 (New Delhi - CESTAT).

2. Rule 2(l) of the CENVAT Credit Rules, 2004 reads as under :-

"‘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 upto 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 upto the place of removal;" [Emphasis Supplied]

3. The above definition can be conveniently divided into the following five categories, insofar as the manufacturers are concerned :-

"(a)Any service used by the manufacturer, whether directly or indirectly, in or in relation to the manufacture of final products,

(b)Any service used by the manufacturer whether directly or indirectly, in or in relation to clearance of final products from the place of removal,

(c)Services used in relation to setting up, modernization, renovation or repairs of a factory, or an office relating to such factory,

(d)Services used in relation to advertisement or sales promotion, market research, storage upto the place of removal, procurement of inputs,

(e)Services used in relation to activities relating to business and outward transportation upto the place of removal."

4. Each of the above limbs of the above definition is an independent benefit/concession. If an assessee can satisfy any one of the above, then credit on input service would be admissible even if the assessee does not satisfy the other limbs. To illustrate, input services used in relation to setting up of modernization, renovation or repairs of a factory will be allowed as credit, even if they are assumed as being not an activity relating to business.

5. The decision of the Apex Court in Kerala State Co-operative Marketing Federation Ltd. v. CIT [1998] 5 SCC 48 holds that the correct way of reading different heads of exemption enumerated in the section would be to treat each as a separate distinct and different head of exemption and if a particular category of an income of a Co-operative Society is exempt from tax, under any one head of exemption, it would be free from tax, notwithstanding that the conditions of another head of exemption are not satisfied.

6. The relevant paragraph is reproduced as below :-

"7. We may notice that the provisions is introduced with a view to encouraging and promoting growth of co-operative sector in the economic life of the country and in pursuance of the declared policy of the Government. The correct way of reading the different heads of exemption enumerated in the section would be to treat each as a separate and distinct head of exemption. Whenever a question arises as to whether any particular category of an income of a co-operative society is exempt from tax what has to be seen is whether income fell with