2021 (3) TMI 1059 - AT - Central Excise

Tribunal allows appeal, overturns disallowed CENVAT credit on construction input services pre-amendment.

The Tribunal allowed the appellant's appeal, setting aside the Commissioner (A)'s order disallowing CENVAT credit on input services related to ... CENVAT Credit - input services - activity of construction of road and storm water drain/civil work at tanker parking facility - denial on the ground that the same are not integral part of the manufacturing activity of the appellant - HELD THAT:- The period involved in the present case was prior to 1.4.2011 when the definition of input service had wide ambit as it included the words “activities relating to business”. Further, the words “activities relating to business” includes all the services which are commercially required for the purpose of carrying on business of manufacture or provider of output service because in the absence of these services it is difficult for the appellant to carry on his business activities. This issue has been considered by the Tribunal in the case of M/S. RAYMOND UCO DENIM PVT LTD VERSUS COMMISSIONER OF CENTRAL EXCISE, NAGPUR [2017 (9) TMI 922 - CESTAT MUMBAI] wherein the Tribunal in para 5 has observed that much water has flown after the amendment in the definition of input services with effect from 1.4.2011 and prior to 1.4.2011, construction of road and drainage system inside the factory premises was considered to be falling under the definition of input service and the assessee was entitled to CENVAT credit of the same. Credit allowed - appeal allowed - decided in favor of appellant. Issues:1. Eligibility of CENVAT credit on input services related to construction of road and storm water drain/civil work at tanker parking facility.2. Interpretation of provisions of CENVAT Credit Rules and applicability of penalty under Rule 15(3).Detailed Analysis:1. The appeal was against the Commissioner (A)'s order rejecting the appellant's appeal and confirming the Order-in-Original disallowing CENVAT Credit of Rs. 9,49,661/- along with interest and penalty. The appellant manufactures excisable products and avails CENVAT credit on input and input services. The Tribunal previously ordered de novo adjudication of a show-cause notice issued to the appellant. The Joint Commissioner disallowed the credit, leading to the current appeal. The appellant argued that the denial of CENVAT credit for service tax paid on input services related to construction work was incorrect. They contended that such services were integral to their business activities and should be covered under the definition of 'activities relating to business.' The appellant cited various decisions supporting their argument and highlighted that the definition of input service should not be restricted to specified services. The appellant also challenged the reliance on certain circulars and decisions in the impugned order, emphasizing the commercial necessity of the services received.2. The appellant further argued that the penalty under Rule 15(3) was not sustainable as the issue involved the interpretation of CENVAT Credit Rules. They cited relevant decisions to support their position. On the other hand, the respondent defended the impugned order, claiming that the construction work in question did not fall under the definition of input service. After considering both parties' submissions and the records, the Tribunal focused on the eligibility of CENVAT credit for the disputed services. The Tribunal noted that the definition of input service before 1.4.2011 included 'activities relating to business,' encompassing services necessary for business operations. Referring to precedents, the Tribunal concluded that construction work inside the factory premises was considered an input service before 1.4.2011. By following the decisions cited, the Tribunal held that the impugned order was not legally sustainable and allowed the appeal of the appellant. The Tribunal set aside the Commissioner (A)'s order, emphasizing the broader interpretation of input services before the relevant amendment.