2019 (2) TMI 441 - AT - Service Tax

Appeal allowed: CENVAT credit denied on railway track items within port premises deemed unsustainable

The appeal was allowed as the Member (Judicial) found that the denial of CENVAT credit on items crucial for laying railway tracks within the port ... CENVAT Credit - inputs/capital goods - steel plates - FRP corrugated sheets - tongue rail - fasgteners - rail sleepers - MS bolts with nuts etc. - Held that:- There is no dispute as to the fact that the CENVAT credit was availed on various items which were used for laying a railway track within the port premises of the appellant. It is also undisputed that appellant is discharging appropriate service tax liability on the port services rendered by them. It is to be seen that the definition of inputs under Rule 2(k) of the CENVAT Credit Rules specifically states that credit is allowed on all goods used for providing any output services - Credit allowed - appeal allowed - decided in favor of appellant. Issues:Denial of CENVAT credit on various items like steel plates, FRP corrugated sheets, tongue rail, fasteners, rail sleepers, MS bolts with nuts.Analysis:Issue 1: Denial of CENVAT CreditThe primary issue in the case was the denial of CENVAT credit to the appellant on several items used for laying railway tracks within the port premises. The Revenue contended that these goods were neither capital goods nor inputs, thus ineligible for CENVAT credit. The adjudicating authority dismissed the appellant's contest based on a Tribunal decision in a similar case. The 1st Appellate Authority upheld this decision, leading to the appeal.Issue 2: Legal ArgumentsThe appellant's counsel argued that the items in question were essential for laying railway tracks, crucial for providing taxable output services, i.e., port services. Referring to the definition of inputs, she highlighted that goods used for providing any output services are eligible for CENVAT credit. She cited a High Court judgment overturning a similar Tribunal decision and a Tribunal judgment favoring CENVAT credit for fabricating vessels. Additionally, she referenced a case where railway sleepers and rails were considered eligible for CENVAT credit for providing cargo handling services.Issue 3: AdjudicationThe Revenue reiterated the findings of the lower authorities, opposing the allowance of CENVAT credit. However, upon careful consideration, the Member (Judicial) found that the CENVAT credit was availed on items crucial for laying railway tracks within the port premises, where taxable port services were rendered. The definition of inputs explicitly allowed credit on goods used for providing output services. Citing precedents from the Hon'ble Gujarat High Court and Tribunal decisions, the Member concluded that the denial of credit was unsustainable. Consequently, the impugned order was set aside, and the appeal was allowed.This detailed analysis of the judgment showcases the issues involved, the legal arguments presented, and the adjudication leading to the decision to allow the appeal based on settled legal principles and precedents.