Cenvat Credit on Construction of Coal Shed for storage

PJ/Case Laws/2011-12/1392

Cenvat Credit on Construction of Coal Shed for storage - Admissibility of

Case: HI TECH POWER & STEEL LTD. Versus COMMR. OF C. EX., RAIPUR

Citation: 2011 (271) E.L.T. 559 (Tri. - Del.)

Issue:- Admissibility of Cenvat credit of service tax paid on construction services for constructing coal shed for storage of coal – strong prima facie case – stay granted.

Brief Facts:- Applicant had availed credit on service tax paid on construction services for constructing a coal shed in their factory for manufacturing sponge iron. Department contended that cenvat credit was not available and was wrongly taken. Hence, the matter is before the Tribunal and stay application is also filed.

Applicant’s Contention:- Applicant stated that definition of "input service" specifically covers service used in relation to setting up and repair of factory, as may be seen in Rule 2(l)(ii).

Respondent’s Contention:- Revenue contended that the impugned service is used for creating an immovable property and following the decision in the case of Vandana Global (P) Ltd. v. CCE [2010 (253) E.L.T. 440 (Tribunal-LB)], this credit should be denied.

Reasoning of Judgment:- The Tribunal noted that it appears that the Department is of the view that coal shed has nothing to do with manufacture of sponge iron. Prima facie, this argument is not acceptable because coal shed is where coal is stored and are prima facie covered by services of input service under Rule 2 (l)(ii). The decision in the case of Vandana Global Ltd is with reference to 'inputs'. The dispute in this case is with reference to definition of 'input service'. These are differently defined in Cenvat Credit Rules, 2004. When the definition specifically includes services relating to setting up of factory, credit on such services cannot be denied prima facie based on the argument that factory is an immovable property. The argument that a shed for storing inputs has no nexus with manufacture of final products is also prima facie unacceptable.

It was held that the appellants have made out a strong prima facie case for waiver of duty demanded. Accordingly, pre-deposit of dues arising out of order in appeal is waived for admission of this appeal.

Decision:- Stay granted.

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PJ/Case Laws/2011-12/1392

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