Cenvat credit on Service Tax paid by contractor for construction of factory building & availability thereof

PJ/Case Laws/2011-12/1278

Case: MADHUSUDAN AUTO LTD v/s COMMISSIONER of C. Ex., Delhi-III

Citation: 2011 (23) S.T.R. 277 (Tri. – Del.)

Issue:- Cenvat credit on Service Tax paid by contractor for construction of factory building – availability thereof - prima facie case found to be strong as input service definition covers setting up – stay and waiver of pre-deposit granted.

Brief Facts:- Appellant had taken credit in relation to the service tax paid by the contractor for the construction of their factory building. Lower Authorities denied the credit. Hence, appellant is before the Tribunal. An application for stay of impugned order is filed.

Appellant’s Contention:- Appellant relied upon the definition of the “input service” and also placed reliance on the order in the case of Maruti Motorcycles (I) Pvt. Ltd versus C.C.E., Delhi–III, Gurgaon, dated: 25.02.2011 and submitted that the authority below clearly erred in disallowing the credit by misconstruing the definition of the “input service”.

Respondent’s Contention:- Revenue relied upon Board’s Circular No. 98/1/2008-ST, Dated: 04.01.2008 and submitted that the ultimate product in the case in hand being building constructed by the contractor, the same being immovable property, appellants are not entitled to avail the credit in relation to the alleged service tax paid by their contractor.

Reasoning of the Judgment:- The Tribunal perused the definition of input services and observed that plain reading of the definition discloses that the same includes services used in relation to the setting up, modernization, renovation or repairs of a factory and in the case in hand since the credit is sought to be availed in relation to service tax paid for the services used in relation to service tax paid for the services used in relation to modernization of the factory premises, prima facie, the Tribunal found that the appellants are justified in claiming credit in respect thereof.

It was held that Board circular was issued in relation to specific question that whether or not commercial or industrial construction service or works contract service used for construction of an immovable property, could be treated as input service for the output service, namely, renting of immovable property service under Cenvat Credit Rules, 2004 and not in relation to the service used for setting up or modernization of the factory wherein the final product manufactured is non–excisable product.

The Tribunal found that prima facie case has been made out for grant of stay while waiving the entire amount demanded under the impugned order. The amount demanded under the impugned order is waived till disposal of the appeal. Stay granted.

Decision:- Stay application allowed.

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PJ/Case Laws/2011-12/1278

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