ORDER
C.N.B. Nair, Member (T)
1. The appellant manufactures cement in its factory at Ropar, Punjab. Cement is liable to Central Excise duty under Chapter 25 of the Tariff. The appellant is also entitled to Cenvat credit in regard to excise duty and service tax paid on input materials and input services. The appellant is also availing itself of that benefit.
2. The dispute in the present appeal is in regard to service tax paid on the freight incurred on the transportation of cement sold by the appellant. The sale is on FOR destination basis and freight is paid by the appellant. The appellant also pays the service tax in regard to the said freight. It claimed input service credit in respect of the service tax so paid. That claim was rejected by the Central Excise. The present appeal is directed against the order of Commissioner of Central Excise rejecting the claim for Cenvat credit.
3. There is no dispute that service tax paid on transport (GTA) is an eligible input credit; but the revenue authorities have taken the view that service tax credit is available only in respect of inward transportation (inputs) or outward transport of final products upto the place of removal. In the present case, since the goods were removed (upon payment of duty) for sale from the factory depots, revenue has taken the view that service tax paid on the cost of transportation from the factory/depots to the buyers’ premises, would not be available as credit.
4. We have perused the record and heard both sides at length.
5. We may first note the definition of input service under Cenvat Rules:
2(1) “input service’ means any service,
(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 service 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.
(emphasis added)
6. The contention of learned Counsel for the appellant is that under the general definition in Sl. No. (ii) “any service used by the manufacturer in relation to clearance of final products from the place of removal” is eligible for input service credit. The contention is that transportation of goods from the place of removal to the buyers premises remains covered by the expression “Clearance from the place of removal” and thus, credit is specifically provided for in respect of service tax paid on transport to buyers. It is also being contended that the mention of ‘outward transportation upto the place of removal’ in inclusion clause of the definition does not have any effect on the claim of the appellant as its claim is in terms of the main definition.
7. The learned Counsel would also argue that an inclusion clause cannot restrict the scope of the main definition in the statute. Reliance in this connection is being placed on the judgment of the Hon’ble Supreme Court in the case of Black Diamond Beverages and Anr. v. Commercial Tax Officer, Calcutta and Ors. .
8. The learned Counsel also contended that the inclusion clause makes the scope of input service credit broad by including a larger number of services which are only indirectly or remotely connected to manufacture, such as accounting, marketing, advertisement, sales promotion etc. The submission is that the provision for input service credit in relation to clearance should also be allowed in its broadest scope.
9. The learned SDR would contend that there is no basis for treating ‘transportation’ as part of ‘clearance’. It is being pointed out that transportation and clearance are entirely separate activities and one cannot take the place of other. In this connection, reliance is placed on the decision of the Tribunal in the case of E.V. Mathai & Co. v. CCE, Cochin and Bhagyanagar Services v. CCE, Hyderabad reported in 2006 (4) S.T.R. 22. It is also being explained that these cases related to service tax on clearing and forwarding service and the dispute was as to whether transportation is part of clearing. The SDR points out that the Tribunal held in both the cases that cost of transportation cannot form part of ‘clearance’. It is being contended that the present dispute remains settled by these decisions of the Tribunal and the appeal is required to be rejected.
10. In regard to the principle governing the interpretation of a main definition and its attendant inclusion clause, the learned SDR pointed out that it is well settled that inclusions clause casts its shadhow on the main definition also and this warranted the joint consideration of the main definition and its inclusion clause. Reliance in this regard is placed on the judgment of the Supreme Court in the case of Reserve Bank of India v. Peerless Co. reported in (1987) 1 SCC. Reference in particular is to Paras 33 and 34 of the judgment, which are extracted below:
33. Interpretation must depend on the text and the context. They are the bases of interpretation. One may well say if the text is the texture, context is what gives the colour. Neither can be ignored. Both are important. That interpretation is best which makes the textual interpretation match the contextual. A statute is best interpreated when we know why it was enacted. With this knowledge, the statute must be read, first as a whole and the section by section, clause by clause, phrase by phrase and word by word. If a statute is looked at, in the context of its eanctment, with the glasses of the statute-maker, provided by such context, its scheme, the sections, clauses, phrases and words may take colour and appear different than when the statute is looked at without the glasses provided by the context. With these glasses we must look at the Act as a whole and discover what each section, each clause, each phrase and each word is meant and designed to say as to fit into the scheme of the entire Act. No part of a statute and no word of a statute can be construed in isolation. Statutes to be construed so that every word has a place and everything is in its, place. It is by looking at the definition as a whole in the setting of the entire Act and by reference to what preceded the enactment and the reason for it that the court construed the expression ‘Prize Chit’ in srinivasa and we find no reason to depart from the court’s construction.
34. We have already referred to the Bhabatosh and Raj Study Groups’ Report, and recommendations. In Para 6.3 of the latter report the two common and basic features of prize chits by whatever name known were identified as the giving of prizes to the lucky ones and the refunding of subscription to everyone. These prize chits by whatever name known were recommended to be banned. It was this recommendation that was accepted by the Parliament in enacting the Prize Chits and Money Circulation Schemes (Banning) Act. If this much is borne in mind it becomes evident that the two requirements mentioned in the two Clauses (i) and (ii) of the definition are not to be read disjunctively ; they are two distinct attributes of ‘Prize Chits’, each of which has to be satisfied. It is important to notice there that the Conventional Chit satisfies both the requirements of the definition of ‘Prize Chit’, since, as we have already pointed out, it involves both the ‘certain’ and the ‘chance’ elements, the certain clement being the refund of the amount of subscriptions less the deductions and the chance element being the time of such payment, dependent on the result of the draw or auction. Yet the definition of ‘Prize Chit’ expressly excludes the Conventional Chit obviously for the reason that the ‘chance’ clement is overshadowed by the ‘certain’ element. If so, why should any construction be placed on the definition so as to bring in all recurring deposit schemes, even if they do not involve a chance element? Such a construction would reduce the definition to a near absurdity and render the reference to the giving or awarding of a prize or gift, a meaningless superfluity. If a Conventional Chit is not a ‘Prize Chit’ by definition, there appears to be no logic in construing the definition to include a recurring deposit scheme. The argument is that the two Clause (i) and (ii) are to be read disjunctively and that they should not be read as if they are joined by the conjunction ‘and’. We do not agree. There is no need to introduce the word ‘or’ either. How Clauses (i) and (ii) of Section 2(e) have to be read depends on the context. The context requires the definition to be read as if both clauses have to be satisfied. There is nothing in the text which makes it imperative that it be read otherwise. The learned Counsel urges that the expression “all or any of the following purposes” indicates that the purpose may be either the one mentioned in (i) or the one mentioned in (ii). We do not agree with this submission. Each of the Clauses (i) and (ii) contains a number of alternatives and it is to those several alternatives that the expression “all or any of the following purposes” refers and not to (i) or (ii) which are not alternatives at all. In fact, a Prize Chit, by whatever name it may be called, does not contemplate the exhaustion of the entire fund by the giving of prizes; it invariably provides for a refund of the amount of subscription, less the deductions, to all the subscribers or to those who have not won prizes, depending on the nature of the scheme. Clauses (i) and (ii) refer to the twin attributes of a Prize Chit or like scheme and not to two alternate attributes.
11. The learned SDR has also contended that the relief available under Cenvat Credit Rules is in regard to ‘input’ and that relief cannot under any circumstances, be made available in respect of a cost incurred on the final product after its removal from the factory/depot. His contention is that any relief allowed in regard to post clearance costs would be contrary to the provisions of Cenvat Credit Rules as well as of the provisions relating to the valuation of excisable goods (Section 4 of Central Excise Act). The submission is that Section 4 of Central Excise Act makes it clear that excise levy cannot take in any cost beyond the point of removal of goods and therefore, input credit also cannot be in relation to any cost incurred after the removal of the goods.
12. Having considered the submissions made by both sides, we find in favour of the revenue. We may now stale our reasons. Crucial point to be noted in regard to Cenvat credit is that credit availability is in regard to ‘inputs’. The credit covers duty paid on input materials as well as tax paid on services, used in or in relation to the manufacture of the ‘final product’. Therefore, extending the credit beyond the point of duty paid removal of the final product, would be contrary to the Scheme of Cenvat Credit Rules.
13. The interpretation sought to be placed by the appellant does not flow from the definition of input service (reproduced in Para 5). The main clause in the definition states that the service in regard to which credit of tax is sought, should be used in or in relation to clearance of the final products from the place of removal.” The learned SDR has brought to our notice the decisions of this Tribunal to the effect that transport does not come within the scope of clearance or forwarding. Further, that transportation (freight) is an entirely different activity from manufacture remains settled by the judgments of Hon’ble Supreme Court in the cases of Bombay Tyre International 1983 (14) E.L.T. 1896 (S.C.), Indian Oxygen Ltd. and Baroda Electric Meters
14. The interpretation convassed by the appellant is also contrary to the rule on the subject contained in the judgment of Hon’ble Supreme Court in the Reserve Bank case. A statute is to be read as a whole and words used interpreted taking into account the context in which they are used. Definitions are to be looked at as a whole. Clauses of a definition are not to be read disjunctively. In the present case, the statute deals with a tax on manufacture. The definition is in the context of relief in regard to duty/tax paid on input services. Post sale transport of manufactured goods is not an input in manufacture. The two clauses in the definition take care to circumscribe input credit by stating that service used in relation to the clearance from the place of removal and service used for outward transportation up to the place of removal are to be treated as input service. The first clause does not mention transport service in particular. The second clause restricts transport service credit up to the place of removal. When these two clauses are read together, it becomes clear that transport service credit cannot go beyond transport up to the place of removal. The two clauses, one dealing with general provision and another dealing with a specific item, are not to be read disjunctively as to bring about conflict and to defeat the laws scheme. The purpose of interpretation is to find harmony and reconciliation among the various provisions.
15. The appeal fails and is rejected.
(Order dictated and pronounced in the open court)