Whether Cenvat credit allowed on Input services for Construction of factory building on other side of road ?

PJ/Case Laws/2012-13/1335

Case:-Arya Vaidya Pharmacy (Coimbatore) LTD. Vs Commr. OF C. Ex., Calicut

Citation:- 2012(28) S.T.R. 415 (Tri. – Bang.)

Brief Facts:-Department has verified ER-1 returns filed by the assessee for the period from August 2007 to March 2008, it was found that appellant had taken credit on various services out of which they were not eligible for Cenvat Credit in respect of security services, telephone services, GTA, construction services, job work charges etc. and accordingly proceedings were initiated which culminated in the impugned order wherein the Cenvat Credit availed in respect of construction service, security service, telephone service and GTA service have been held to be inadmissible and consequently Cenvat Credit availed on construction service and availed and utilized on telephone, GTA and security services have been disallowed and demanded with interest from the appellant. A penalty has also been imposed under Rule 15(3) of Cenvat Credit Rules, 2004.

Appellant Contentions:- Appellant submits that he wanted to expand the production facilities and therefore constructed a factory building on the other side of the road. Credit has been denied on the ground that the factory was constructed away from the existing premises. According to the definition of 'input service' as it existed during the relevant period, input service included service used in relation to setting up of a factory also. So long as the manufacturer has used the service for setting up of a factory, the credit is admissible. It was also submitted that subsequently the factory has been registered and the registration number for the existing factory on the other side of the road and for the new factory set up is one and the same. This would show that the department itself has accepted subsequently that the appellant has set up a factory and proceeded to register the same. Under these circumstances, it is quite clear that the factory building constructed by the appellant was for setting up of a factory and therefore the service utilized by them is an 'input service' and therefore Cenvat credit has been correctly availed. It was also submitted that till date the credit has not been utilized because of the dispute. Under these circumstances, it is quite clear that the appellant is eligible for the benefit of Cenvat credit on the construction service utilized by them. As regards security services, Appellant further submits that this service is one of the services recognized as common service which when used by a manufacturer in respect of exempted goods as well as the dutiable goods credit can be taken. Therefore Cenvat credit of service tax paid on security service should be admissible and allowed.

Respondent Contentions:-Respondent submits that GTA service and telephone service, these two services are not covered by the list of common services in respect of which credit would be admissible if used for exempted as well as dutiable goods. In such a situation, assessee is required to maintain separate records for taking the credit and its utilization. Since assessee has failed to maintain separate accounts, the credit availed in respect of these two services has to be disallowed and has rightly been disallowed. To this extent the order of the Commissioner is required to be upheld.

Reasoning of Judgment:-We have considered the submissions on both the sides. According to the submissions made by the appellant, Tribunal has allowed cenvat credit in respect of construction services and security services and has confirmed the demand in respect of the remaining services. Consequently, the demand comes down subsequently to less than Rs. 35,000/-. Having regard to the size of the appellant and the amount involved, it was considered as appropriate that the penalty should be set aside. It was also noted that the show-cause notice has been issued within the normal limitation time. The appeal is disposed of in the above terms.

Decision:-Appeal disposed off.

Comment:-The analogy drawn from this case is settled position of law that cenvat credit of input services can be taken only if it is in respect of dutiable goods or taxable services and also in relation to providing taxable service or in relation to manufacture of dutiable goods.

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PJ/Case Laws/2012-13/1335

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