Eligibility for availment of capital goods credit to be checked with taxability of service and receipt of capital goods.

PJ/Case Laws/2012-13/1462

Case:- COMMISIONER OF CENTRAL EXCISE , SURAT Versus ANERI CONSTRUCTION

Citation:- 2012 (28) S.T.R. 578 (Tri.- Ahmd.)

Brief Facts:-The issue involved in this case is regarding to eligibility for availment of CENVAT credit of the tax/duty paid on the purchase of Air Compressors by the respondent and received in the factory premises on 5-5-2005. The Adjudicating Authority has submitted that the Air Compressors which are purchased and received by appellant for providing the output services ‘Commercial & Industrial Construction Services’ (Pipe lines services) and the said services were brought into the taxable net from 16-6-2005. So such credit could not be availed on duty paid on such Air Compressor though it is Capital goods as the said Capital Goods were received in the premises of the service provider on 5-5-2005, before the services were taxable under the Finance Act, 1994. The Respondent preferred appeal before the first appellate authority. The first appellate authority, after considering the submissions has set aside the order-in-original and held in favour of the assessee.

Appellant’s Contentions:- The adjudicating authority has submitted that the Air Compressors which are purchased and received by appellant for providing the output services ‘Commercial & Industrial Construction Services’ (Pipe lines services) but the said services were brought into the taxable net from 16-6-2005. So such Credit could not be availed on duty paid on such Air Compressor though it is Capital goods as the said Capital Goods were received in the premises of the services provider on 5-5-2005, before the services were taxable under the Finance Act, 1994.

Reasoning of Judgment:-After considering the records & hearing both sides, the Tribunal held that the undisputed fact was that the assessee had received the Air- compressors on 5-5-2005. It was also undisputed that the said Air-compressors were to be utilised by the assessee for providing output service of laying of long distance pipe line covered under the category of "Commercial and Industrial Construction Services", which came into tax net with effect from 16-6-2005. The learned counsel has placed reliance on the Hon’ble Gujarat High Court Judgment, and it is seen that the Hon’ble High Court has specifically considered the facts of the case wherein the facts were in respect of the reversal of the Cenvat credit availed by the appellant was sought to be recovered by issuance of show cause notice. The facts in that case which has been indicated by their Lordships in paragraph-2 of their judgment are totally different from the facts in the current case before the Tribunal. Hence the reliance placed by the learned counsel on the case of Hon'ble Gujarat High Court will not carry his case any further.
Tribunal also found an identical issue in respect of the capital goods received for the manufacturing of final products which were exempted, was being heard and the eligibility for availing the credit was decided by the Larger Bench of the Tribunal in the case of Spenta International Limited - 2007 (216) E.L.T. 133 (Tri.-LB). The learned counsel would try to distinguish the said judgment by stating that the judgment was in respect of the capital goods which were used and which required installation during the relevant period. Tribunal find that such distinguishing factor will not carry the case of the assessee any further, inasmuch a the facts in this case are not disputed which indicates that such capital goods can be utilised by the assessee only for the services to be rendered which came into service tax net from 16-6-2005. If that be so, Tribunal is bound by the judgment and ratio of which has been reproduced hereinabove. Accordingly, Tribunal set aside the impugned order and allow the appeal filed by the Revenue.

Decision:- Appeal Allowed.

Comment:-The substance of this case is that the eligibility to avail and utilise the cenvat credit on capital goods is to be checked with reference to the taxability of the service in which they are used. If the service itself is brought into tax net after receipt of the capital goods, such credit cannot be availed and utilised.

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PJ/Case Laws/2012-13/1462

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