2023 (2) TMI 828 - AT - Service Tax

Cenvat credit granted for expansion services, aligning with rules

Gujarat Chemical Port Limited Versus Commissioner of Central Excise & ST, Vadodara-II

The Tribunal allowed the appeal, granting the appellant Cenvat credit for services used in the expansion of the existing Jetty. The Tribunal emphasized ... CENVAT Credit - input services - Management & Business Consultant service - Technical Inspection and certification service availed for the purpose of proposed additional Jetty to be constructed adjacent to the existing Jetty - denial of credit on the ground that said services were used in connection with construction of a new Jetty which fall under the ‘setting up’ of the project which is excluded as per the exclusion clause in the definition of Input Services under Rule 2(l) of Cenvat Credit Rules, 2004. HELD THAT:- From the facts it is undisputed that the appellant already had Jetty in operation and they proposed to construct one more Jetty adjacent to the existing Jetty. In this case it cannot be said that the appellant are setting up altogether a new Jetty. The additional Jetty is nothing but expansion of the existing Jetty. Therefore, the expansion, renovation or modernization of existing jetty, construction is still covered in inclusion clause of definition of Input Service under Rule 2(l) of Cenvat Credit Rules, 2004. Reliance placed in the case of PIRAMAL GLASS LIMITED VERSUS COMMISSIONER OF CENTRAL EXCISE & ST, VADODARA [2019 (10) TMI 1032 - CESTAT AHMEDABAD] where it was held that There is no dispute that the appellant have an existing manufacturing factory wherein many other plants and machinery and two furnace were already setup and with the said existing facility, the appellant are manufacturing excisable goods for last many years. For enhancing their production, the appellant set up a new furnace, it cannot be said that they have setup a new factory. It is merely an expansion of the existing factory and therefore, even if the term “setting up” of factory is removed from the inclusion clause of definition of input service, it does not adversely affect the appellant to avail Cenvat credit on various services. Thus, a consistent view was taken by this Tribunal that even though setting up of a new factory, construction of building of service provider is not excluded from the definition of Input service. In this case the construction of Jetty is clearly in the nature of expansion of existing Jetty therefore, credit is clearly admissible. Appeal allowed. Issues Involved:Whether the appellant is entitled to Cenvat credit for Management & Business Consultant service and Technical Inspection and certification service used for the proposed additional Jetty construction.Analysis:The issue at hand revolves around the eligibility of the appellant for Cenvat credit concerning services utilized for the expansion of an existing Jetty. The department denied the credit, citing the exclusion clause in the definition of Input Services under Rule 2(l) of Cenvat Credit Rules, 2004, pertaining to the 'setting up' of a project. The appellant argued that the services were employed for the expansion of the current Jetty, not for setting up a new one, thus justifying their entitlement to the credit. The Tribunal analyzed the situation, emphasizing that the proposed additional Jetty was an extension of the existing one, constituting expansion rather than the establishment of a new Jetty. This distinction is crucial as the inclusion clause of the definition of Input Service encompasses the renovation, modernization, or expansion of existing facilities. The Tribunal referred to previous judgments to support this interpretation, highlighting cases such as Piramal Glass Limited and Shiruguppi Sugar Works Limited, where Cenvat credit was allowed for similar expansion projects. The Tribunal underscored that the main clause of the definition mandates that services used directly or indirectly in relation to the manufacture of final products qualify as input services, reinforcing the appellant's right to claim the credit in this scenario.Moreover, the Tribunal differentiated the present case from the facts of Liugong Indian Pvt. Limited, emphasizing that the services in question were not exclusively for setting up a new factory. By aligning with past decisions and interpreting the definition of input services, the Tribunal concluded that the appellant's claim for Cenvat credit was valid, ultimately setting aside the impugned order and allowing the appeal. This comprehensive analysis reaffirms the appellant's entitlement to the credit for the services utilized in the expansion of the existing Jetty, aligning with the broader interpretation of input services under the Cenvat Credit Rules, 2004.In another case, Manaksia Coated Metals & Industries Limited, the Tribunal delved into the eligibility of Cenvat credit for Service Tax paid by service providers for professional services related to the expansion of production capacity. The Tribunal scrutinized the definition of input services under Rule 2(l) of the Cenvat Credit Rules, 2004, emphasizing services used in modernization, renovation, or repairs of a factory as eligible for Service Tax credit. The Tribunal found errors in the lower authorities' rejection of the appellant's claim, highlighting that the services rendered were indeed linked to the expansion/renovation work at the plant. By interpreting the definition of input services and aligning with the appellant's assertions, the Tribunal set aside the impugned order, allowing the appeal and affirming the appellant's eligibility for Cenvat credit.Furthermore, in Unique Chemicals, the Tribunal reiterated the eligibility of Cenvat credit for services used in the expansion of existing production capacity, emphasizing that the removal of 'setting up' from the inclusion clause did not preclude credit for such activities. By analyzing the facts and aligning with the appellant's arguments, the Tribunal set aside the impugned order, allowing the appeal and confirming the admissibility of the credit. These consistent decisions underscore the Tribunal's interpretation of input services and the allowance of Cenvat credit for activities related to the expansion or modernization of existing facilities, reinforcing the appellant's entitlement in the present case.