Cenvat credit on BTS tower services remained partly admissible, while construction-related services and penalty were disallowed.

After the 01.04.2011 amendment to the Cenvat Credit Rules, services used for construction of a building or civil structure, including works contract service for foundation or support structures, were treated as excluded from input service credit. On the facts, credit was therefore inadmissible for construction service and works contract service used in erection of BTS towers, but remained admissible for erection, commissioning and installation service, consultancy engineer's service, business auxiliary service and business support service. In view of the limited disallowance and the absence of mala fide intent, penalty was held unwarranted and set aside.

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Issues: (i) Whether Cenvat credit on input services used for erection of BTS towers and related activities was admissible after the amendment to the definition of input service from 01.04.2011. (ii) Whether the penalty imposed on the appellant was sustainable.

Issue (i): Whether Cenvat credit on input services used for erection of BTS towers and related activities was admissible after the amendment to the definition of input service from 01.04.2011.

Analysis: The amended definition of input service under Rule 2(1) of the Cenvat Credit Rules, 2004 excludes specified services when used for construction of a building or civil structure or for laying foundation or making structures for support of capital goods. On the facts, construction service and works contract service fell within the exclusion and were not eligible for credit. The remaining services, including erection, commissioning and installation service, consultancy engineer's service, business auxiliary service and business support service, were not covered by the exclusion and were treated as admissible input services. The distinction drawn in the order between the services actually availed and the services discussed below was also noted.

Conclusion: Cenvat credit was admissible only for the services other than construction service and works contract service.

Issue (ii): Whether the penalty imposed on the appellant was sustainable.

Analysis: The dispute turned on interpretation of the amended definition of input service, and most of the credit claimed was held admissible. The inadmissibility related only to the excluded construction and works contract services after 01.04.2011. In these circumstances, no mala fide intention was found warranting penalty.

Conclusion: The penalty was not sustainable and was set aside.

Final Conclusion: The appellant succeeded on the major part of the credit dispute and obtained relief from the penalty, with disallowance confined to construction and works contract services only.

Ratio Decidendi: After the 01.04.2011 amendment, only those input services specifically falling within the exclusion for construction-related activity are ineligible for Cenvat credit, while other services used for providing the output service remain admissible.

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