2021 (4) TMI 1285 - AT - Central Excise

Appeal allowed: Cenvat credit granted for pipeline, inspection services, correction of input service zone.

The appeal was partially allowed, modifying the Commissioner (Appeals) order to grant Cenvat credit on tax paid for laying pipelines for inward ... CENVAT Credit - laying of pipeline of inward transmission of CNG, service availed for inspection at a new sites - credit on input service mistakenly taken at Zone I that pertains to Zone II - services for medical check-up in health camp arranged for auto and taxi drivers using CNG under CSR Scheme - HELD THAT:- The issue of laying of pipeline for inward transmission of CNG has been settled by this Tribunal in the appellant’s own case pertaining to a different period vide decision dated 14-4-2019 of CESTAT Mumbai. The findings is concurred with and in carrying forward the judicial precedent, the appellant’s claim for availment of credit on service tax paid for laying of pipelines used for inward transmission of inputs-natural gas is, therefore, accepted and the benefit of availment of such credit is hereby extended to the appellant. Credit of input services taken on Zone I and II - HELD THAT:- It is observed that appellant had registered itself under Centralised Registration Scheme and these zones were subsequently demarcated as C.B.E. & C. Circular No. 875/13/2008-CX., dated 16-10-2008 clearly stipulates that separate registration is required under each jurisdiction of the Chief Commissioner. This being the factual and legal position, appellant won’t have been allowed such credit had it not transferred its credit in the book of accounts from one zone to another. Since it had done the changes that is required for availing credit in the other zone, it should not have been denied the credits for narrow technical consideration as it is in no way stand as a stumbling block in extending such benefit. Hence the credit on input services pertaining to Zone II is allowed to the appellant who had already made necessary changes of transfer of such credits between the zones. The dispute concerning inspection at new site and denial of Cenvat credit on input services availed for such inspection needs discussion on two counts. Firstly, appellant contended that it is statutory/mandatory requirement for them to have inspection of the geographical area of the city/locality where compressed natural gas distribution is to be effected - The second reason on which denial is justified by the Learned DR is that the definition of Cenvat credit available in Rule 2(l) of Cenvat Credit Rules, 2004 clearly excludes the word “setting up” with effect from 1-4-2014 and therefore no interference in the order passed by the Commissioner (Appeals) is required on this issue since such feasibility report was a part of setting up of gas distribution network. The only other denial of credit left is concerning services of free medical check-up of the drivers etc. on which appellant claimed Cenvat credit on the ground of meeting corporate social responsibility but there is nothing available on record to show that such services are freely extended to all CNG Drivers irrespective of the fact that they were consuming CNG from the appellant services station or elsewhere - the finding of the Learned Commissioner (Appeals) is concurred with, that the appellant is not entitled to get benefits of Cenvat credit on services availed for providing free medical check-up. The order of Commissioner (Appeals) is modified to the extent of allowing Cenvat credit on these three components namely tax paid for laying of pipeline of inward transmission of CNG, service availed for inspection at a new sites, credit on input service mistakenly taken at Zone I that pertains to Zone II - Appeal allowed in part. Issues: Denial of Cenvat credit on tax paid for laying of pipeline, credit on input services mistakenly taken at different zones, services for inspection at new sites, and free medical check-up under CSR Scheme.1. Denial of Cenvat credit for laying of pipeline:The appellant contested the denial of Cenvat credit on tax paid for laying pipelines for inward transmission of CNG. The Tribunal referred to a previous decision in the appellant's favor and extended the benefit of credit for the service tax paid for laying pipelines used for inward transmission of natural gas. The appellant's claim was accepted based on established judicial precedent.2. Credit on input services taken at different zones:The issue of credit on input services mistakenly taken at Zone I instead of Zone II was examined. The Tribunal noted that the appellant had registered under the Centralized Registration Scheme, and separate registration was required under each jurisdiction. As the appellant had transferred the credits between zones in compliance with the requirements, the denial of credit based on technical grounds was deemed unjustified. Consequently, the credit on input services pertaining to Zone II was allowed to the appellant.3. Services for inspection at new sites:The dispute regarding the denial of Cenvat credit on input services availed for inspection at new sites was analyzed. The appellant argued that inspection was a mandatory requirement for gas distribution operations as per regulatory board notifications. The Tribunal disagreed with the department's view, emphasizing that the feasibility study and approval were prerequisites for operating the gas distribution network, not akin to setting up a factory. The appellant was deemed entitled to avail the credit on tax paid for inspection services at the site/locality.4. Free medical check-up services under CSR Scheme:The denial of credit for services related to free medical check-ups for drivers under the CSR Scheme was addressed. The appellant claimed Cenvat credit based on corporate social responsibility. However, as there was no evidence to demonstrate that the services were provided to all CNG drivers, irrespective of their source of CNG consumption, the Tribunal upheld the decision that the appellant was not entitled to the Cenvat credit for such services.Conclusion:The appeal was partially allowed, modifying the Commissioner (Appeals) order to allow Cenvat credit on tax paid for laying of pipeline of inward transmission of CNG, services for inspection at new sites, and credit on input service mistakenly taken at Zone I that pertains to Zone II. The judgment was pronounced on 16-4-2021.