Erection and commissioning at buyer's site are incidental to manufacture; manufacturer retains responsibility, Cenvat credit allowed

CESTAT-Ahd (AT) held that erection and commissioning services performed at the buyer's premises are incidental to manufacture and eligible for Cenvat credit where the manufacturer retains responsibility and nominates the subcontractor. The tribunal rejected the revenue's contention that location of service at buyer's site barred credit, finding the subcontractor acted under the appellant and the appellant was the service provider. Accordingly the appellants' Cenvat credit claim was allowed and the department's appeal to enhance penalty was dismissed.

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In the appellate tribunal CESTAT AHMEDABAD citation 2009 (1) TMI 129, the case involved the availing of Cenvat credit of service tax paid on erection and commissioning services from a service provider during a specific period. The primary issue was whether the appellants were eligible for the credit. The Commissioner (Appeals) had ruled in favor of the appellants, stating that the penalty was not applicable due to the interpretation of statutory provisions. However, the revenue contended that a penalty should be imposed under Section 11AC.

The appellants argued that the service was provided by the service provider both at the manufacturer's premises and the buyer's premises, and that the cost of erection and commission the machines was included in the value of the machines sold. They provided evidence to support their claim, including sales contracts and invoices. The appellants also argued that the service of erection and commissioning should be considered in relation to the manufacture of the machines, and therefore, they were eligible for the Cenvat credit.

After considering the arguments from both sides, the tribunal found in favor of the appellants, stating that they were indeed eligible for the Cenvat credit. The appeals filed by the revenue were rejected, and the appeals filed by the appellants against the demand for Cenvat credit were allowed. The tribunal also rejected the department's appeal for the enhancement of penalties. The decision was pronounced in court, concluding the case.

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