2022 (5) TMI 1119 - AT - Service Tax

Tribunal grants Cenvat credit for construction services on industrial estate roads

Bombay Market Art Silk Co Op (Shops & Warehouse) Society Limited Versus C.C.E. & S.T. -Surat-I

The Tribunal allowed the appeal, setting aside the order denying Cenvat credit for construction services related to re-carpeting of roads in an industrial ... CENVAT Credit - input services - Construction/ Works Contract Service for re-carpeting of road in their industrial estate - credit denied on the ground that it is a new construction of road under works contract service which is excluded in the definition of Input Service under Rule 2(l) of Cenvat Credit Rules, 2004 - HELD THAT:- The fact is not under dispute that the industrial estate already existed and for moving around the Industrial Estate the tar roads were also existing. The works contract/ construction was executed for the purpose of re-carpeting of existing road. Therefore, the said services are for the purpose of repair and renovation of the exiting industrial estate. It is observed from the notes of the Board meeting for the purpose of re-carpeting of the road that it is for re-carpeting and not for new construction of road. Therefore, this service is for repair and renovation and not for originating the new construction. This issue has been considered in the decision of this Tribunal in the case of RELIANCE INDUSTRIES LTD. VERSUS C.C.E. & S.T. -RAJKOT [2022 (4) TMI 729 - CESTAT AHMEDABAD] where it was held that any service relating to modernization, renovation of the existing factory is admissible as input service which is the direct case of the appellant. From the above decision of this Tribunal it is clear that any construction and works contract if used for repair and renovation of existing factory, the same falls under inclusion clause of definition of Input Service, accordingly, the Cenvat credit is admissible - Appeal allowed - decided in favor of appellant. Issues Involved:1. Entitlement to Cenvat credit for Construction/Works Contract Service for re-carpeting of roads in an industrial estate.2. Interpretation of 'Input Service' under Rule 2(l) of the Cenvat Credit Rules, 2004.3. Distinction between new construction and repair/renovation for Cenvat credit eligibility.Issue-wise Detailed Analysis:1. Entitlement to Cenvat Credit for Construction/Works Contract Service for Re-carpeting of Roads:The appellant sought Cenvat credit for services related to the re-carpeting of roads within their industrial estate. The lower authorities denied this credit, arguing that it constituted new construction, which is excluded from the definition of Input Service under Rule 2(l) of the Cenvat Credit Rules, 2004. The appellant contended that the re-carpeting was for existing roads and should be classified as repair or renovation, which is included in the definition of Input Service.2. Interpretation of 'Input Service' under Rule 2(l) of the Cenvat Credit Rules, 2004:The appellant argued that the re-carpeting of existing roads falls under the inclusive clause of 'repair or renovation' as per Rule 2(l) of the Cenvat Credit Rules, 2004. This interpretation was supported by the minutes of the Board meeting, which confirmed that the work was for re-carpeting and not new construction. The Tribunal referenced the case of Reliance Industries Limited vs. CCE & ST, Rajkot, where it was held that services related to modernization, renovation, and repair of an existing factory are admissible as Input Service.3. Distinction between New Construction and Repair/Renovation for Cenvat Credit Eligibility:The Tribunal emphasized that the exclusion clause in the definition of Input Service applies to services used for the initial setting up of a factory. However, services used for modernization, renovation, or repair of an existing factory remain within the inclusive part of the definition. This distinction was crucial in determining the eligibility for Cenvat credit. The Tribunal cited several judgments, including Bharat Coking Coal Ltd vs. Commissioner of Central Excise & S. Tax, Ranchi, and Ion Exchange (I) Ltd. vs. Commissioner of C. Ex., Cus. & S.T., Surat-II, which supported the appellant's position that services for renovation and repair are admissible for credit.Conclusion:The Tribunal concluded that the re-carpeting of existing roads in the industrial estate constitutes repair and renovation, not new construction. Therefore, it falls within the inclusive clause of the definition of Input Service under Rule 2(l) of the Cenvat Credit Rules, 2004. The impugned order denying Cenvat credit was set aside, and the appeal was allowed. The Tribunal's decision was based on a harmonious interpretation of the inclusive and exclusion clauses of the definition of Input Service, supported by relevant case law.Final Judgment:The appeal was allowed, and the impugned order was set aside, with the Tribunal dictating and pronouncing the judgment in the open court.