Admissibility of credit on services of Commercial construction for constructing factory building – whether the said can be said to fall under the definition of input service?

PJ/Case Laws/2011-12/1203

Case: -Suzuki Motorcycle (I) Pvt. Ltd. V/s. Commr. of C. Ex., Delhi – III, Gurgaon

Citation: -2011 (267) E.L.T. 216 (Tri.- DEL.)

Issue:-Admissibility of credit on services of Commercial construction for constructing factory building – whether the said can be said to fall under the definition of input service?

Brief Facts: -Appellant had availed cenvat credit of service tax paid on the construction of factory building on the basis of the invoices issued by the providers of commercial construction service. Department issued show cause notice denying credit so taken. The Adjudicating Authority confirmed the demand with interest and also imposed penalty. Hence, appellant is before the Tribunal. Application for waiver of pre-deposit and stay is filed.

Appellant’s Contention:- Appellant contended that the definition of input service covers the services used in or relation to the setting up, modernization, renovation or repairs of factory premises of provider of output service or an office relating to such factory or premises. That the Cenvat would be allowed provided services are used exclusively or in relation to the manufacture of dutiable goods. It was contended that the factory building was being used in housing the plant and machines.

Respondent’s Contention:-Revenue contended that the cenvat credit will not be allowed because the commercial construction service was availed for bringing into existence an immovable property which is neither chargeable to Excise duty nor Service tax.

Reasoning of Judgment:-The Tribunal held that the construction of factory building has been done to manufacture dutiable products. The definition of input service was studied in detail and it was held that there is merit in the appellant’s case. It was noted that the hardship would arise due to demand of cenvat, interest and penalty.

Decision: - Waiver of pre-deposit and stay granted.

Comment:- this is very important case as the department normally takes this contention of immovable property even in cases of Cenvat credit on capital goods. They say that since the immovable property has come into existence the credit cannot allowed. Now, they have taken this contention in service tax credit cases also.

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PJ/Case Laws/2011-12/1203

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