Tribunal grants credit for Service Tax on factory renovation, citing Board circular and FDA compliance.

The Tribunal ruled in favor of the appellants, allowing them credit for Service Tax paid on construction services for modernization and renovation of their factory. The decision was based on the interpretation that modernization, renovation, and repair services within the factory premises constituted eligible input services, despite the exclusion of new construction under the amended definition. The Tribunal considered a circular from the Board supporting this interpretation and granted the appellants relief, emphasizing compliance with USA FDA guidelines as a significant factor in their decision.

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Issues:
Whether the appellants are eligible for credit of Service Tax paid on construction service relating to modernization/renovation of their factory.

Analysis:
The appeal was filed against an order passed by the Commissioner of Central Excise, Customs, and Service Tax (Appeals) regarding the eligibility of the appellants to avail Cenvat credit for Service Tax paid on construction services. The dispute arose due to an amendment in the definition of input service from 01.4.2011, which excluded construction services. The appellant contended that while new construction might be excluded, modernization, renovation, and repair of existing plant and machinery within the factory premises should still be considered eligible for credit. The appellant referred to a circular issued by the Board to support their argument.

The Revenue argued that all construction services within the factory premises were excluded from the definition of input service post-amendment, making Service Tax paid on such services inadmissible for credit. The Revenue's stance was based on the exclusion clause added to the definition of input service. The Tribunal examined the relevant provisions before and after the amendment to the definition of input service. The Tribunal noted that services related to modernization, renovation, and repair of the factory were still considered input services, despite construction of buildings or civil structures being excluded.

The Tribunal highlighted a circular issued by the Board clarifying the eligibility of credit for Service Tax paid on construction services used for modernization, renovation, or repair. The Tribunal concluded that construction services related to modernization, renovation, and repair of the factory were within the ambit of input service, and therefore, the Service Tax paid on such services was eligible for credit. As the appellant had undertaken modernization and renovation work to comply with USA FDA guidelines, the Tribunal allowed the appeal, setting aside the previous order and granting consequential relief as per the law.

In summary, the Tribunal held that the appellants were indeed eligible for credit of Service Tax paid on construction services for modernization and renovation of their factory, based on a harmonious reading of the relevant provisions and the clarification provided by the Board.

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