Eligibility of cenvat credit oncommercial construction service.

PJ/CASE LAW/2015-16/2893

Case:-COMMISSIONER OF C. EX., DELHI-III VERSUS MADHUSUDAN AUTO LTD.

Citation:- 2015 (40) S.T.R. 732 (Tri. - Del.)

Brief Facts:-Revenue is in appeal against the impugned order wherein learned Commissioner (Appeals) allowed input service credit to the respondent of service tax paid for commercial/industrial construction service. The facts of the case are that the respondent is manufacturer of excisable goods and to set up their factory, they availed commercial construction services. Revenue sought to deny the Cenvat credit on the services during the period June, 2005 to September, 2010 on the premise that same does not qualify as input service as per Rule 2(l) of CCR, 2005.

Appellants Contention:-Learned AR submits that construction services have no nexus to the manufacturing activity of the respondent. Therefore, they are not entitled to deny the Cenvat credit thereon.

Respondents Contention:-On the other hand, learned Counsel for the respondent supported the impugned order.

Reasoning of Judgement:-Heard the parties. Considered the submissions.
To clarify ‘input service’ Rule 2(l) of the Cenvat Credit Rules, defines it as under :
“2(l) ”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 up to 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 up to 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 relating, share registry, and security, inward transportation of inputs or capital goods and outward transportation up to the place of removal :’’
On plain reading of the said provisions, it is clearly mentioned that service which is used in relation to setting up of factory or an office, relating to such a factory is ‘input service’. As construction service used by the respondent is only for setting up of their factory, therefore as per the provisions of Rule 2(l) itself allowed the appellant to avail Cenvat credit on these services of service tax paid by them. In these circumstances, the show cause notices were not required to be issued to the respondents and consequently proceedings against the respondents were not required. As learned Commissioner (Appeals) has rightly allowed the Cenvat credit on the services impugned, therefore, they do not find any infirmity in the impugned orders, same are upheld. Appeals filed by the Revenue are dismissed.

Decision:-Appeal dismissed.

Comment:- The analogy in the case is that according to Rules 2(l) as applicable during the material period of time and Rule 3 of Cenvat Credit Rules, 2004,service which is used in relation to setting up of factory or an office, relating to such a factory is treated as ‘input service’. As the construction service used by the respondent is only for setting up of their factory, therefore, the cenvat credit was allowed.

Prepared By:- Neelam Jain

Comments

PJ/CASE LAW/2015-16/2893

Post a Comment

Query