Appeal granted for CENVAT credit denial on construction services vital for manufacturing.

The appeal was allowed as the Judicial Member found that the denial of CENVAT credit on construction services for setting up a factory building was not sustainable in law. The construction was completed before the amendment excluding such credit came into effect, and it was deemed essential for manufacturing final products. Relying on favorable precedents, the impugned order was set aside, granting relief to the appellant engaged in manufacturing corrugated boxes and rolls.

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Issues: Appeal against denial of CENVAT credit on construction services for setting up a factory building.

Analysis:
The appeal was directed against the order passed by the Commissioner(Appeals) upholding the Order-in-Original which rejected the appellant's appeal regarding the denial of CENVAT credit. The appellant, engaged in manufacturing corrugated boxes and rolls, availed CENVAT credit on services related to pest control and construction. The department contended that the credit on construction services was irregular as it did not meet the definition of input service under the CENVAT Credit Rules, 2004. The original authority dropped the demand on pest control services but disallowed credit on construction services, leading to the appeal.

During the hearing, the appellant's consultant argued that the impugned order contradicted binding judicial precedents. He emphasized that the definition of input service during the relevant period included services related to setting up or modernizing a factory used in the manufacturing process. The consultant highlighted that the construction of the factory building was essential for manufacturing final products, and the credit should not be denied based on an amendment that occurred after the relevant period. He also pointed out that the show-cause notice was issued beyond the normal limitation period, and there was no suppression on the appellant's part.

On the other hand, the Assistant Commissioner reiterated the findings of the impugned order during the hearing. After considering both sides' submissions and examining the records, the Judicial Member found that the construction of the factory was completed before the amendment excluding credit for setting up factory buildings came into effect. Relying on previous decisions that favored the assessee, the Judicial Member concluded that the denial of CENVAT credit on construction services was not sustainable in law. The appeal was allowed, and the impugned order was set aside, granting relief to the appellant.

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