CESTAT Bangalore: Appellate Tribunal rules in favor of appellant on Cenvat credit denial for Works Contract & Sponsorship Services

The Appellate Tribunal CESTAT BANGALORE ruled in favor of the appellant in appeals concerning denial of cenvat credit on Works Contract Service and Sponsorship Service. The denial of credit on Works Contract Service was overturned as no new structure was created, only renovation/modernization. Regarding Sponsorship Service, the denial was deemed unsustainable due to lack of nexus with exported output service. Appeals ST/20107 to 20112/2021 were allowed, while appeals ST/20195-20196/2021 were remanded for providing challan copies. Consequential interest under Section 11BB of the Central Excise Act was granted to the appellant upon refund.

---

---

Issues: Denial of cenvat credit on Works Contract Service and Sponsorship Service

In the judgment, the Appellate Tribunal CESTAT BANGALORE addressed the denial of cenvat credit on Works Contract Service and Sponsorship Service in appeals against Orders-in-Original. The denial of cenvat credit on Works Contract Service was based on the exclusion of construction of commercial buildings and civil works from the definition of input services. The appellant argued that the work undertaken was only renovation/modernisation, not new construction, supported by invoices. The Tribunal found in favor of the appellant, stating that the denial cannot be sustained as no new structure or complex was created. Regarding the denial of cenvat credit on Sponsorship Service, it was alleged that the credit had no nexus with the exported output service. The Tribunal referred to a previous order and a CBEC letter, concluding that the denial for lack of nexus was unsustainable. Additionally, it was noted that the Department did not question the credit initially, making it impermissible to question it during the refund claim. The Tribunal ruled in favor of the appellant, stating that the denial of cenvat credit on Sponsorship Service cannot be sustained.

In specific appeals concerning Sponsorship Services, the adjudicating authority noted the absence of challan copies, leading to the inability to determine the exact nature of the service. The authority held that without the input invoice, the service could not be considered essential. While the precedent from a previous case was applicable, the Tribunal decided to remit the issue back to the adjudicating authority for the appellant to provide challan copies. Once satisfied, the authority was instructed to issue the refund without insisting on nexus.

Consequently, appeals ST/20107 to 20112/2021 were allowed, and appeals ST/20195-20196/2021 were remanded for the limited purpose of providing challan copies. The appellant was also granted consequential interest under Section 11BB of the Central Excise Act, which is automatic upon refund granting. The judgment was pronounced in the Open Court on 28/10/2021.

---