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)

The tribunal allowed the appeals filed by M/s Jindal Steel Works Ltd (JSW) regarding the eligibility of CENVAT credit on various input services. The ... CENVAT Credit - various input services - Hospitality services - pest control services - Commercial or Industrial construction service - Repair/servicing of motor vehicles services - AMC services - Services in respect of printing and issue of Meal vouchers‖ to the employees - Supply of Tangible Goods services - AMC of passenger elevators - Horticultural consultancy at various places - Maintenance of garden and fixing of agriculture artificial grass - Laying and maintenance of milestones - Installation, commissioning and maintenance of Public Address System in the factory - Goods sent for job work services - Maintenance of mason’s shed services - Apply of sky/street lights and fixing of roof sheeting services - Services received for own aircraft - Repair and maintenance of non-factory building, electrical installation and installation of rapid doors - Architect service - Laying, maintenance and repair of railway service - Manpower Supply services - Cleaning Services - Excavation of earth, roof work, sheeting work, PCC and RCC work of the buildings within the factory - Advertising Services - Air Travel Agent services - Airport services - Banking and Financial services - Business Support Services - Cargo Handling Services - Chartered Accountant Service - Convention Hall (Renting) services - Custom House Agent services - Goods Transport by Road - Health Care Services - Information Technology and Software services - Intellectual Property services - Interior Decorator services - Membership of Club or Association services - Port services - Sponsorship services - Survey and Map Making services - technical Testing and Analysis services - technical Inspection and Certification Service - Telecommunication services - HELD THAT:- It appears that the definition of input service did give vast connotation before or after amendment making the services used directly or indirectly, in or in relation to the manufacture of the final products. Only change made after amendment is that certain services are excluded. Various High Courts have interpreted to Rules to have a wider connotation rather than the constrictive view taken by Revenue. Hon’ble High Court of Bombay in the case of M/S. COCA COLA INDIA PVT. LTD. VERSUS THE COMMISSIONER OF CENTRAL EXCISE, PUNE-III [2009 (8) TMI 50 - BOMBAY HIGH COURT] has held that the manufacturer is entitled to take credit on services used directly or indirectly, in or in relation to manufacture and clearance of the final products up to the place of removal and on various services as illustrated in the inclusive part of the definition; further they held, in the case of CCE, NAGPUR VERSUS ULTRATECH CEMENT LTD., [2010 (10) TMI 13 - BOMBAY HIGH COURT], that the definition of input service read as a whole makes it clear that the said definition not only covers services, which are used directly or indirectly in or in relation to the manufacture of final product, but also includes other services, which have direct nexus or which are integrally connected with the business of manufacturing the final product. The appellants have correctly availed the credit on various disputed services - Appeal allowed - decided in favor of appellant. 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)