2016 (9) TMI 194 - AT - Service Tax

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

The appellate tribunal allowed the appeal filed by M/s. Rashtriya Ispat Nigam Ltd. The tribunal held that the appellant was eligible for credit on works ... CENVAT credit reversal – works contract service – construction / execution of the works contract of a building or a civil structure or a part thereof - whether the works of laying of pipes comes within the ambit of works contract which is expressly excluded in the definition of input services ? - construction service - Section 65(25b) of the Finance Act, 1994 – Held that: - Wherever the legislature wanted to include the construction of a pipeline or conduit, it has been specifically mentioned separately in the definition. This itself would indicate that erection/construction of pipeline or conduit cannot be considered as part of construction of building of civil structure or part thereof. Thus, appellant is eligible for credit on service tax paid - appellant not liable to pay interest on the credit which was reversed before utilization as held in the case Bill Forge (P) Ltd 2011 (4) TMI 969 - KARNATAKA HIGH COURT – appeal disposed off – decided in favor of appellant. 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 CreditThe 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 ServiceThe 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 CreditThe 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.