2007 (3) TMI 1 - AT - Central Excise

Cenvat credit limited to duty on inputs and transport up to place of removal; no credit for post-sale freight

GUJARAT AMBUJA CEMENTS LTD. Versus COMMISSIONER OF C. EX., LUDHIANA

CESTAT, New Delhi dismissed the appeal, holding that Cenvat credit extends only to duty on input materials and tax on services used in or in relation to ... Cenvat/Modvat - service tax paid on the freight incurred on the transportation of cement sold by the appellant - input services - Availability of service tax credit for inward or outward transportation up to the place of removal - HELD THAT:- 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. 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. The appeal fails and is rejected. Issues:Dispute over Cenvat credit for service tax paid on freight for transportation of cement sold by the appellant.Analysis:The appellant, a cement manufacturer, claimed Cenvat credit for service tax paid on freight for transporting cement sold on FOR destination basis. The dispute arose when the Central Excise rejected this claim, arguing that service tax credit is only available for inward or outward transportation up to the place of removal. The appellant contended that the transportation of goods to the buyers' premises falls under the definition of 'clearance from the place of removal,' making it eligible for credit. They also argued that the inclusion clause broadens the scope of input service credit to include various services indirectly related to manufacturing.The Tribunal examined the definition of input service under Cenvat Rules, emphasizing that credit is available for services used in or in relation to the manufacture of final products and clearance from the place of removal. The appellant's interpretation, extending credit beyond the point of removal, was deemed contrary to the Cenvat Credit Rules' scheme. Previous Tribunal decisions and Supreme Court judgments established that transportation is distinct from manufacturing activities and does not qualify for credit post-clearance.The Tribunal rejected the appellant's interpretation, citing the need to read statutes as a whole and interpret definitions in context. It emphasized that the purpose of interpretation is to harmonize provisions and avoid conflicts. The appellant's argument that transport service credit should extend beyond the place of removal was deemed inconsistent with the statutory framework governing relief for duty/tax paid on input services related to manufacturing. Ultimately, the appeal was dismissed, upholding the revenue authorities' decision to reject the Cenvat credit claim for service tax on freight.