2024 (3) TMI 1284 - AT - Service Tax

Tribunal Allows Appeal: Cenvat Credit for International Erection and Commissioning Services Justified for Manufacturing Business.

M/s. Lakshmi Automatic Look Works Ltd. Versus The Commissioner of CGST & Central Excise

The Tribunal set aside the impugned order, allowing the appeal in favor of the appellant. It concluded that the cenvat credit for service tax paid on ... CENVAT Credit - input services - erection and commissioning of machines carried out in China and Italy based on invoices / debit notes raised by M/s.Voltas Ltd., Coimbatore - HELD THAT:- The appellant has availed credit in regard to services only upto 01.04.2011. As rightly argued by the learned counsel for appellant that during the period prior to 01.04.2011, the definition of ‘input services’ was wide enough as it included the words “activities relating to business”. Undeniably, the services are related to the business of manufacture of the appellant. For this sole reason, the appellant is eligible for credit. Further, as argued by the appellant, the erection and commissioning has been outsourced by appellant through M/s.Voltas Ltd., Coimbatore. The agreement between the appellant as well as the foreign buyer shows that the appellant has to do erection and commissioning of the machines sold at the buyer’s premises. Therefore, the cost incurred by the appellant to M/s.Voltas Ltd. has gone into the cost of the machines sold/exported by the appellant. For this reason also, the appellant is eligible for credit - the denial of credit is not justified - impugned order is set aside - Appeal allowed. Issues involved: Eligibility of cenvat credit for service tax paid on erection and commissioning services.Summary:The appellant, engaged in exporting textile machineries, availed cenvat credit for service tax paid on charges for erection and commissioning of machines in China and Italy. The department contended that as the services were carried out in foreign countries and not related to the manufacture of the appellant's finished products, the credit was not eligible under the Cenvat Credit Rules, 2004. Show cause notice was issued for the period 2008-09 and 2011-12, proposing to deny the credit and recover the amount with interest and penalty. The original authority, as well as the Commissioner (Appeals), upheld the denial. The appellant appealed against this decision.The appellant argued that the credit availed was for the period prior to 01.04.2011 when the definition of 'input services' included 'activities relating to business.' They claimed eligibility for credit as the services were related to their manufacturing business, even though carried out outside India. The appellant outsourced erection and commissioning activities to M/s.Voltas Ltd., and the expenses incurred for these services contributed to the cost of goods exported. The appellant asserted that these services were essential for manufacturing the goods, and thus, the denial of credit was unjustified.After considering the arguments and evidence presented, the Tribunal found that the denial of credit was not justified. They held that the services were indeed related to the appellant's manufacturing business, making them eligible for the credit. The impugned order was set aside, and the appeal was allowed with any consequential relief.(Separate Judgment by Judges: None)