2012 (11) TMI 994 - AT - Service Tax

Dispute over Cenvat credit for construction services upheld on appeal, recognizing statutory obligations

The case involved a dispute over the denial of Cenvat credit for various services related to civil construction work in a factory. The Commissioner ... Input services - vastu consultancy - Denial of Cenvat credit of Service Tax in relation to civil construction work in the factory - setting up of labour hutments, kisan sheds is for providing temporary residential facility to the workers as also for the cane growers – Held that:- Vastu is in relation to the construction activity and as such, if construction activity has been held to be admissible services by the Commissioner, the vastu consultancy is also required to be held accordingly. As regards dismantling of building structure - before raising new construction for setting up of the factory, it is necessary to clear the place including dismantling of old structure stand thereon and such services are essentially included under the limb of setting up of a factory. As such, I find that the denial of credit by the adjudicating authority on the above services was not correct and proper. Extended period of limitation – Held that:- Credit so availed was part of the total credit availed by the assessee and was being duly reflected in the returns so filed. The appellant cannot be held guilty of suppression or mis-statement with an intent to evade payment of duty - a positive act with a mala fide intention is the requisite criteria for invocation of longer period of limitation. In the absence of the same, assessee cannot be held guilty of any malafide - entire demand having been raised after the normal period of limitation is time-barred. Issues:Cenvat credit denial for various services in relation to civil construction work in the factory.Analysis:1. The dispute revolves around the denial of Cenvat credit for services like labour hutments, Kisan sheds, Vastu consultancy, and dismantling for building structure of sugar house. The Commissioner disallowed the credit, stating these services do not fall under the definition of input services as per Rule 2 and are not related to production or construction of the factory.2. The appellant argues that the construction of labour hutments is essential for providing residential facilities to workers, indirectly contributing to better production. Citing precedents, the appellant contends that services indirectly related to business activities, like rent-a-cab services, are eligible for Cenvat credit. Similarly, for Kisan sheds, it is argued that these are mandatory under the UP Cane Purchase Act and thus qualify as services related to procurement of inputs.3. Regarding Vastu consultancy, the appellant asserts it is part of architect services crucial for construction activities. Referring to past decisions, the appellant argues that services like landscaping charges and catering bills have been considered associated with business activities. The dismantling of the building structure is justified as a necessary step before new construction, falling under the setting up of a factory.4. The judgment acknowledges the statutory obligations of providing facilities like labour hutments and Kisan sheds, rejecting the notion that these are merely welfare measures. It emphasizes that services need not be necessary but only availed to qualify for credit. The ruling supports the view that Vastu consultancy is closely related to construction activities and should be eligible for credit. The dismantling of old structures is deemed essential for setting up a factory.5. The judgment also addresses the issue of limitation, noting that demands were raised beyond the normal period. It dismisses the claim of suppression or misstatement by the appellant, stating that the credit availed was part of the total credit reflected in filed returns. As there was no evidence of malafide intent, the demand raised beyond the normal limitation period is deemed time-barred.6. Ultimately, the impugned orders are set aside, and the appeal is allowed on both merits and limitation, providing consequential relief to the appellants.