TMI Blog2008 (9) TMI 56X X X X Extracts X X X X X X X X Extracts X X X X ..... nteen of the manufacturer is input service, in respect of which credit can be taken by the manufacturer. For this purpose, it would be useful to reproduce the definition of input services as defined under Rule 2(1) of Cenvat Credit Rules, 2004. The said Rule reads as under: "(1) "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 upto 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;" The above de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of express definition (main definition) in the manner "input service" has been defined in the Cenvat Rules, 2004, which says " "input service" means any service......... and includes..."; whereas purely inclusive definition reads as manufacture includes any process ........; inputs include........ ; cooked food includes........; where there is no main definition but only an inclusive definition. He referred to the decision of the Apex Court in the case of Hamdard (Wakf) Laboratory v. Dy. Labour Commissioner - 2007 (5) SCC 281 wherein it was observed as under: "When an interpretation clause uses the word "includes", it is prima facie extensive. When it uses the word "mean and include", it will afford an exhaustive explanation to the meaning which for the purpose of the Act must invariably be attached to the word or expression. [See G.P. Singh's Principles of Statutory Interpretation, 10th Edition, Pages 173 and 175]." It was submitted that recently, in N.D.P. Namboodripad (Dead) by LRs. v. Union of India (UOI) and Ors. - 2007 (4) SCALE 361 the Apex Court held as under: "17. If the words 'and includes' were intended to rope in certain items which would, not be part of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h as accounting, auditing, financing, recruitment and quality control". He submitted that the conjunction 'and' used in the sub-clause is significant and it limits the examples following "such as" to only five services and no more. Thus, an activity relating to business should be one such as accounting, auditing, financing, recruitment and quality control or akin to accounting, auditing etc. but no further services which is not akin to any of these five services can be added to "such as" list. Since outdoor catering is not one of services listed in the inclusive clause and is neither akin to any of the five business activities enumerated in "such as" sub-clause falling under business activity, it cannot be considered to be covered by the inclusive definition and therefore cannot be considered as an input service. 4. Ld. advocate, Shri Sridharan, on behalf of the appellants submits that the definition of input services uses the term "such as" which is purely illustrative but not exhaustive. The term "such as" has been defined in the Concise Oxford Dictionary. "Such as" means for example or of a kind that and in Chambers Dictionary "such as" means for example. The word "such as" ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... manufacture but the value of which gets absorbed in the value of goods. As regards services received after the clearance of the goods from the factory, the credit would be extended on services received upto the stage of place of removal (as per Section 4 of Central Excise Act.) In addition to this, services like advertising, market research etc. which are not directly related, to manufacture but are related to the sale of manufactured goods would also be permitted for credit. iv. Full credit of service tax on services (such as telephone, security, construction, advertising service, market research etc.) which are received in relation the offices pertaining to a manufacturer or service provider would also be allowed." It was submitted that from the above, it is clear that the object of the Legislature, while introducing Cenvat Credit Rules was to allow credit of all taxable services that go to form a part of the assessable value of the final product on which excise duty is to be charged or output service on which service tax is to be charged. This includes services received prior to commencement of manufacture, but the value gets absorbed in the value of goods and also the serv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lation to setting up, modernization, renovation or repairs of a factory", thereby, expanding the scope of the said term. Moreover under the Draft Credit Rules, the Explanation limited the scope of input services to those activities only which relate to "management of business, such as accounting, auditing, financing, recruitment and quality control". On the other hand, Cenvat Credit Rules expanded the said term to read as 'activities relating to business'. It further went on to read "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." In view of the above, it was submitted that the argument of the department that the term "such as" is restricted to the terms "accounting, auditing, financing, recruitment and quality control" only is incorrect in as much as the scope of the term "activities relating to business" has been expanded and illustrated further with the addition of services such as coaching and training, share registry, credit ra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m "activities in relation to business". 8. It was submitted that Service Tax is a value added tax and a consumption tax and is therefore essentially forms part of the value of the goods/services, the credit of which cannot be denied. 9. We have considered the submissions. We find that it is well settled that every clause of the Statute should be construed with reference to the context in which it is issued. A bare mechanical interpretation of words and application of legislative intent is devoid of concept and purpose will reduce most of the remedial and beneficial legislations to futility. To be literal in meaning is to see the skin and miss the soul. The legislature never wastes its words or say anything in vain and a construction which attributes redundancy to legislation will not be accepted, as has been observed by the Supreme Court in the case of Union of India v. Hansoli Devi - (2002) 7 SCC 273. A similar observation was made by the Apex Court in the case of Peerless Finance (supra) referred to by the ld. Jt. CDR that the word "include" is very generally used in interpretation clauses in order to enlarge the meaning of words or phrases occurring in the body of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent to employees (iii) Provision for retirement benefits such as gratuity and superannuation (iv) Medical benefits (v) Subsidised food (vi) Leave with pay and holiday payment (vii) Leave encashment (viii) Other allowances such as children's education allowance, conveyance allowance which are payable to employees in the normal course of business etc." The above paras of CAS-4 clearly shows that cost of subsidised food is included in the cost of production. We further note that in case of a factory having more than 250 workers under Section 46 of the Factories Act, 1948, it is mandatory on the part of the factories to provide a canteen facility within the factory premises and failure to comply with the provisions of Section 46 attracts prosecution and penalty under Section 92 of the Factories Act, 1948. A service tax on outdoor catering services is paid by the manufacturer for running the canteen, irrespective of the fact that a subsidised food is provided or not. Whether the cost of food is borne by the worker or by the factory, the same will form part of expenditure incurred by the manufacturer and will have a bearing on the cost of production. In view of the same, em ..... X X X X Extracts X X X X X X X X Extracts X X X X
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