Appellate tribunal allows credit for works contract services excluding interest on reversed credit

M/s. Rastriya Ispat Nigam Ltd. Versus CCE, C&ST, Visakhapatnam

M/s. Rastriya Ispat Nigam Ltd. Versus CCE, C&ST, Visakhapatnam - 2016 (44) S.T.R. 136 (Tri. - Hyd.) Issues:
1. Disallowance of service tax credit in a show-cause notice.
2. Denial of credit for works contract service.
3. Demand of interest on reversed credit.

Analysis:

Issue 1: Disallowance of Service Tax Credit
The appellant, M/s. Rashtriya Ispat Nigam Ltd., was served with a show-cause notice proposing to disallow service tax credit. The original authority disallowed credit in respect of works contract service claimed in an invoice issued by M/s. Vijaya Engineering Works. The authority confirmed the demand of interest and penalty on the disallowed credit. The appellant challenged the confirmation of demand and interest on the reversed credit.

Issue 2: Denial of Credit for Works Contract Service
The appellant argued that the definition of input services excludes services for construction of a building or civil structure after 01/04/2011. However, the appellant contended that laying pipeline is distinct from construction of a building or civil structure. Referring to relevant legal provisions and an Advance Ruling, the appellant asserted that the works contract for laying pipes should not be excluded from input services.

Issue 3: Demand of Interest on Reversed Credit
The second issue involved the demand of interest on the credit reversed by the appellant before utilization. The appellant cited legal judgments to support their position that they are not liable to pay interest on the reversed credit. The Revenue supported the findings in the impugned order, arguing that the credit was rightfully denied and interest demand was valid.

The appellate tribunal analyzed the definitions of input services and construction services under the Finance Act, 1994. It was noted that the exclusion clause in the definition of input services does not specifically include works contract services related to laying pipelines. Referring to a previous judgment, it was established that construction of pipelines is distinct from building or civil structure construction. Consequently, the tribunal held that the appellant was eligible for credit on works contract services related to laying pipelines. On the issue of interest on reversed credit, following precedents, the tribunal ruled in favor of the appellant, stating they were not liable to pay interest on the reversed credit. As a result, the appeal was allowed with consequential reliefs, if any.