CENVAT credit allowed for construction services during plant setup under Rule 2(l) of CCR 2004

CESTAT Chandigarh allowed the appeal regarding CENVAT credit eligibility for construction services during 2006-2010. The Tribunal held that construction activities for plant setup were covered under the definition of Input Service under Rule 2(l) of CCR, 2004 during the relevant period. Following consistent tribunal decisions and Punjab & Haryana HC precedent, the Tribunal ruled in favor of the assessee, finding the impugned order unsustainable in law and set it aside with consequential relief.

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Issues Involved:
1. Eligibility of input service tax credit on construction services for factory construction.
2. Interpretation of the definition of 'Input Service' under Rule 2(l) of the Cenvat Credit Rules, 2004.
3. Applicability of CBEC Board Circular No. 98/1/2008-ST dated 04.01.2008.

Summary:

1. Eligibility of Input Service Tax Credit on Construction Services:
The appellant, engaged in manufacturing catalytic converters and door lock parts, was audited, revealing that input service tax credit on construction services related to factory construction was claimed. The Assistant Commissioner issued a Show Cause Notice for inadmissible credit amounting to Rs. 52,61,184/-, which was confirmed by the Commissioner of Central Excise, New Delhi. The appellant contested the order, arguing that the construction services fall within the definition of 'Input Service' under Rule 2(l) of CCR, 2004, and cited various Tribunal decisions supporting this view.

2. Interpretation of the Definition of 'Input Service':
The appellant argued that during the relevant period (2006-2010), the definition of 'Input Service' included services used in relation to setting up a factory. The definition was amended on 01.04.2011, excluding construction services, but the period in question was before this amendment. The Tribunal reviewed the definition of 'Input Service' before and after the amendment and found that construction services were indeed covered under the definition during the relevant period.

3. Applicability of CBEC Board Circular No. 98/1/2008-ST:
The appellant contended that the Commissioner wrongly relied on the CBEC Board Circular, which stated that construction services are neither subjected to Central Excise nor liable to service tax. The Tribunal noted that various benches had consistently held that construction activities for setting up a factory were covered under 'Input Service' before the 2011 amendment. The Tribunal cited several decisions, including those from the Punjab and Haryana High Court and other Tribunal benches, affirming the eligibility of construction services for cenvat credit during the relevant period.

Conclusion:
The Tribunal concluded that the issue was no longer res-integra and consistently decided in favor of the assessee. The impugned order was set aside, and the appeal was allowed with consequential relief as per law.

(Pronounced on 29.11.2023)

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