2021 (11) TMI 1127 - AT - Service Tax

Tribunal allows CENVAT credit for setting up Technology Centre despite rule change.

M/s. Shell India Pvt Ltd. Versus Commissioner of Central Tax, Bangalore North

The Tribunal ruled in favor of the appellant, allowing them to avail CENVAT credit for services used in setting up the Technology Centre, despite the ... Recovery of CENVAT Demand - input services or not - eligibility of CENVAT credit on the services used for setting up of the new Technology Centre - effect of amendment brought into Rule 2(l) ibid vide Notification No.3/2011- C Ex.(NT) dated 1.3.2011, effective from 1.4.2011 - period of dispute involved in this case is from October 2011 to March 2016 - HELD THAT:- The definition of ‘input service’ was amended with effect from 1.4.2011. under the un-amended definition, the phrase ‘setting up’ was specifically provided in the inclusive part for consideration as input service. However, the said phrase was deleted in the amended definition from 1.4.2011. Accordingly, the department had entertained a belief that in view of deletion of such phrase in the definition clause, the appellant should not be eligible for the benefit of consideration of the disputed services as input service. On perusal of the definition of ‘input service’ contained in the CENVAT statute, it transpires that the services used either directly or indirectly, in or in relation to the manufacture of final product should be considered as input service. In this case, it is an undisputed fact that the appellant had availed CENVAT credit on the disputed services for setting up of new Technology Centre and that by utilising such facility, it had provided the output services defined under the service tax statute. Since the disputed services were ultimately meant for accomplishing the objective of providing the output service, it cannot be said that since, the phrase ‘setting up’ was specifically excluded in the inclusive part of definition of input service, the benefit of CENVAT credit should not be available. Even though, such phrase was deleted in the inclusive part of the definition of input service with effect from 1.4.2011, but the main part of such definition clause has considered within its ambit such phrase as input service for the purpose of availment of CENVAT credit of service tax paid on the disputed services. Thus, the denial of CENVAT benefit on the disputed services cannot be sustained. There are no merits in the impugned order insofar as it has denied the CENVAT benefit and confirmed the adjudged demands on the appellant - appeal allowed. Issues:Whether the appellant is entitled to CENVAT credit for services used in setting up a new project post-amendment of the definition of 'input service' under the CENVAT Credit Rules, 2004.Analysis:The case involved a dispute regarding the eligibility of the appellant to avail CENVAT credit on services used for setting up a new Technology Centre after the amendment to the definition of 'input service' under the CENVAT Credit Rules, 2004. The department contended that the appellant was not eligible for the credit due to the deletion of the term 'setting up' from the definition effective from 1.4.2011. Show-cause proceedings were initiated against the appellant, leading to the impugned order confirming the demand for CENVAT credit amounting to Rs.12,22,88,925/- along with penalties.The appellant argued that the disputed services fell within the definition of 'input service' as they were used for setting up the Technology Centre, essential for providing output services. The appellant relied on previous Tribunal decisions to support their stance. On the other hand, the Revenue contended that the deletion of 'setting up' from the definition post-amendment rendered the appellant ineligible for CENVAT credit.Upon examination, the Tribunal analyzed the definition of 'input service' and concluded that services used directly or indirectly for the manufacture of the final product should be considered as input services. The Tribunal noted that the disputed services were utilized for setting up the Technology Centre, enabling the provision of output services. Despite the deletion of 'setting up' from the definition, the Tribunal held that the main part of the definition still encompassed such services for availing CENVAT credit. Citing precedents, the Tribunal emphasized that services indirectly related to manufacture, including setting up facilities, qualified as input services post-amendment.In light of the above, the Tribunal found no merit in the impugned order's denial of CENVAT benefit to the appellant. Consequently, the Tribunal allowed the appeal in favor of the appellant by setting aside the impugned order.In conclusion, the Tribunal ruled in favor of the appellant, allowing them to avail CENVAT credit for services used in setting up the Technology Centre, despite the deletion of 'setting up' from the definition of 'input service' under the CENVAT Credit Rules, 2004.