TaxTMI 
TaxTMI 
TaxTMI 
There are many litigations arised out in the availing of CENVAT credit. Rule 2(l) has been interpreted in many a time by the tribunals, High Courts, Supreme Court for arriving at certain decision. One interesting question raised here is whether CENVAT credit Rules requires that the service has to be received in the manufacturer's premises to be eligible for CENVAT credit of the service tax paid. The Ahamedabad tribunal answered this question in the case 'Commissioner of Central Excise, Vapi V. Alidhara Textool Engineers Private Limited' [2009 -TMI - 33376 - CESTAT AHMEDABAD].
In this case the assessee had availed CENVAT credit of service tax paid on erection and commissioning services received by them from a service provider on account of erection, commissioning of the machines at the premises of the buyers of the said machines. The Commissioner (Appeals) held in this case that no penalty is imposable since the issue involved is primarily the interpretation of statutory provisions. The Revenue also filed appeal against the order of Commissioner (Appeals) on the contention that the Commissioner should have imposed penalty under Section 11AC to the extent to100% of the CENVAT credit demanded and confirmed by the Commissioner (Appeals).
The assessee submitted that the credit has been disallowed by the department merely on three grounds by the lower authorities as follows:
It was further contended that:
The Department submitted the following:
The tribunal after hearing both sides the tribunal found that erection and commissioning charges have been included in the cost of the machines sold. The assessee has selected the agency to do this work and once the purchases enters into an agreement for supply of the machine including the erection and commissioning charges, the responsibility for erection and commissioning is of the manufacturer. The activities are incidental to manufacturing activity undertaken in the manufacturer's premises. The incidental process of erection and commissioning being incidental to manufacture, has to be treated as continuation of earlier process which started in the manufacturer's premises. The process is complete only after the erection and commissioning takes place. The Tribunal accepted the vies of the assessee that Rule 2(l) of CENVAT Credit Rules does not require that service has to be rendered at the factory of the manufacturer for the purpose of eligibility of service tax credit. Therefore the stand of Revenue that since the service was provided at the buyer's premises credit is not admissible cannot be accepted.
The tribunal further advised what has to be examined is whether the service provided is in or in relation to manufacture. While the eligibility for service tax credit on outward transport services is to be examined in connection with place of removal, there is no such requirement as regards other services. In respect of other services what is to be examined is whether they can be held to be rendered in or in relation to manufacture directly or indirectly. Once the whole transaction of manufacture of the machine, erection and commissioning and supply is treated as one transaction and excise duty is charged on the whole transaction value, services rendered for the purpose of completion of this whole transaction has to be treated to have been rendered in or in relation to the manufacture.
The tribunal further held that it is not correct to say that the assessee is not the service provider. As per the contract the responsibility for providing erection and commissioning is with the assessee even if it is treated erection and commissioning activity as a separate service activity, the service provider would be the assessee and the receiver would be the buyer. The sub contractor is actually working under the manufacturer and therefore he is a service provider of service to the assessee. The tribunal held that the assessee is eligible for CENVAT credit availed by him and accordingly succeeds on merit.