2021 (12) TMI 381 - AT - Central Excise

Tribunal broadens scope of input services for CENVAT credit, dismissing department's appeal

M/s. JSW STEEL LTD Versus Commissioner of Central Excise, Customs and Service Tax-BELGAUM (Vice-Versa)

M/s. JSW STEEL LTD Versus Commissioner of Central Excise, Customs and Service Tax-BELGAUM (Vice-Versa) - TMI Issues Involved:1. Eligibility of CENVAT credit on various input services.2. Interpretation of 'input service' under Rule 2(l) of the CENVAT Credit Rules, 2004.3. Applicability of exclusions under the amended Rule 2(l) from 1.4.2011.4. Validity of demands confirmed by the adjudicating authority.5. Department's appeal against allowance of credit and non-quoting of specific provisions.Issue-Wise Detailed Analysis:1. Eligibility of CENVAT Credit on Various Input Services:The appellants, M/s Jindal Steel Works Ltd (JSW), were denied CENVAT credit on various input services on grounds such as services not being received at the place of manufacture, services not related to the manufacture of final products, and payments for services lacking proper descriptions. The appellants argued that the denial was contrary to the definition of 'input service' in Rule 2(l) and eligibility conditions in Rule 3(1) of the CENVAT Credit Rules, 2004. They relied on multiple judgments and circulars which supported the inclusion of various services as eligible for credit.2. Interpretation of 'Input Service' Under Rule 2(l) of the CENVAT Credit Rules, 2004:The definition of 'input service' under Rule 2(l) includes services used directly or indirectly in or in relation to the manufacture of final products and clearance of final products up to the place of removal. The appellants cited several judgments, including CIT Vs Tajmahal Hotel and CCE Vs Dynamic Industries Ltd, which held that the phrase 'includes' is used to enlarge the meaning and scope of services eligible for credit. Additionally, services used in business activities were deemed eligible for credit as per Coca Cola India Ltd Vs CCE, Pune and other cases.3. Applicability of Exclusions Under the Amended Rule 2(l) from 1.4.2011:Post amendment from 1.4.2011, Rule 2(l) excluded certain services such as construction of buildings, motor vehicle-related services, and services primarily for personal use or consumption of employees. However, the appellants argued that the exclusions did not apply to their case as the services were used in relation to the manufacturing process or business activities.4. Validity of Demands Confirmed by the Adjudicating Authority:The learned Adjudicating Authority confirmed demands totaling Rs. 11,57,63,597/- while allowing credit for certain services. The appellants contested the demands, arguing that the services were eligible for credit based on various judicial precedents. The tribunal found that the appellants had correctly availed the credit on disputed services, as the definition of 'input service' had a wider connotation, covering services integrally connected with the business of manufacturing the final product.5. Department's Appeal Against Allowance of Credit and Non-Quoting of Specific Provisions:The department appealed against the allowance of credit amounting to Rs. 53,59,32,598/- and the non-quoting of provisions of Rule 15(1) of the CCR read with Section 11AC of the Central Excise Act or Section 76 of the Finance Act, 1994. The tribunal dismissed the department's appeal, stating that the appellants correctly availed the credit and the impugned orders did not survive.Conclusion:The tribunal set aside the impugned orders and allowed the appeals filed by M/s JSW. The department's appeal was dismissed. The tribunal emphasized that the definition of 'input service' should be interpreted broadly, covering services used directly or indirectly in or in relation to the manufacture of final products and business activities.(Order pronounced in the open court on 01/12/2021)