TaxTMI 
TaxTMI 
TaxTMI 
2015 (6) TMI 307
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.... pipeline which is used for transport of gas as held by Member (Judicial). OR Whether the appellants have not made out a case for complete waiver of service tax on inputs, input services (except input services received directly by the appellant) and capital goods used for erection of pipelines used for transportation of gas as held by Member (Technical)". "ii) Whether consequently, recovery of service tax, interest and penalty should be stayed during the pendency of the appeal as held by Member (Judicial). OR Whether an amount of Rs. 25 Crores should be deposited by the appellant within two months of the date of receipt of this order and the recovery of balance amount of service tax, interest and penalties be stayed till the disposal of the appeal as held by Member (Technical)" 2. Heard both the sides and perused the records. 3. The facts which are not in dispute, the entire issue is regarding the pre-deposit of an amount of hearing and disposing of the appeal on merits. It is also undisputed that the appellant had availed Cenvat Credit on services rendered by pipeline laying contractors, other input services for commissioning of the pipelines prior to it being brought in us....
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....I have considered the submissions made by both the sides and perused the records. 7. The issue involved in this case is to whether appellant is eligible for the Cenvat credit of the service tax paid by the contractors who were laying pipelines for transportation of gas through pipeline. It is undisputed that the appellant is rendering the services of transportation of gas through pipeline services, the said activity of the appellant falls under the head of "transport of goods (other than water) through the pipeline or conduit services". It is seen from the records that the appellant is procuring pipes which are imported by them under EPCG system. The said pipes are then handed over to the pipeline laying contractors, who lay the pipes undertake the entire job of pipeline and bill the appellant as for providing the services of "commercial or industrial construction services" and there is also no dispute that contractors classification of service is not accepted. It is noted that there is no dispute that as to the fact that the pipeline system which is put in place by the contractors is used for rendering of out put services falling under the head of "transport of goods (other than ....
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.... the dispute in favour of the Revenue. In the same case, the services were provided by various service providers to the EPC contract winner, was also denied and upheld by the Tribunal on the ground that service providers, provided services to EPC contract winner and not to the said GSPL. The facts of the GSPL case and the facts of the case in hand are totally different as has been already recorded by me. In my view if the services which are rendered by the pipeline laying contractors directly to appellant herein for laying the pipeline and other input services which are required for rendering of the service by the appellant, prima facie the Cenvat credit cannot be denied to the appellant; the same view is applicable in respect of the capital goods which are procured by the appellant directly for construction/laying of the pipeline. 8. In view of the foregoing, I find that the views recorded by the Hon'ble Member (Judicial), that a case has been made out for the complete waiver of the demands, is a correct view and I concur with the same. 9. In my considered view, the appellants have made out a prima facie case for complete waiver of pre-deposit of the amounts involved. 10. R....
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....ices, Business Auxiliary services relating to laying down the pipeline. These aforesaid services were directly availed by the applicant from the service providers for laying down the pipeline. Pursuant to an audit, a show-cause notice was issued to the applicant to deny CENVAT Credit availed by the applicant during the period April 2008 to March 2012 on the premise that as the credit of the service tax paid by the pipeline laying contractors the same was inadmissible as the service rendered by the contractors resulted in creation of a immovable property. In so far as the CENVAT Credit of the service tax paid by the other service providers as also credit on inputs and capital goods was concerned the same was sought to be denied on the premise that the said inputs, input services and capital goods were required by the pipeline laying contractors and not by the applicant. Thereafter, the adjudication took place and it was held that laying pipeline by the contractors resulted in the creation of an immovable property, hence CENVAT Credit on inputs, input services and capital goods is not admissible till April 2009. Aggrieved by the said order, the applicant is before us seeking waiver o....
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....vices for which it had directly contracted with service providers. 3.4 With regard to credit on capital goods such as valves, compressors, pumps, pipes availed prior to commencing of pipeline it is submitted that the said goods are specified in the definition of capital goods in Rule 2a(A) of the Cenvat Credit Rules and credit in respect of the same was clearly admissible as the same were used for providing output services. He further submitted that the question whether any goods are capital goods for a service provider or its contractor depends entirely on the scope of supply and the deliverables. 3.5 He further submitted that these capital goods have been procured by the applicant and supplied to the pipeline laying contractor to lay pipeline on jobwork basis. Therefore, these are the inputs and capital goods for the applicant only. The adjudicating authority has relied on to deny CENVAT Credit on the case of GSPL (supra) but the facts in that case are not applicable to this case as in that case the contract was given by GSPL on turnkey basis. In our case, the contract was given only on the jobwork basis. 3.6 He further submits that denial of credit is barred by limitation as ....
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....service and capital goods which have been used for laying down pipeline by pipeline laying contractors of the applicant and these pipelines were used in providing the services of 'transportation of Gas'. The pipeline laying contractors have paid service tax on the job work of laying pipeline under the category of 'Commercial and Industrial Construction' services. The claim of the applicant is that the inputs and capital goods have been procured by them and these inputs and capital goods were given to pipeline laying contractors for laying pipeline which means that the applicant remained owner of the said inputs and capital goods during pipeline laying by the pipeline laying contractor. As the agreement between the applicant and the pipeline laying contractors is limited for laying of the pipeline is only on jobwork basis. Therefore, the applicant being the owner of the said goods i.e. inputs and capital goods. 6.1 The learned Commissioner in the impugned order has relied on the decision of GSPL (supra) to say that the applicant is not entitled to take CENVAT Credit on inputs and capital goods as the same are used by the pipeline laying contractor and the same are i....
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.... providing output service therefore, input and input service are para material for the service providers. The observation of the Tribunal is given here-in-under:- "3.2 The definition of 'inputs' is limited to the definition of 'input services' as can be seen from the definition given above. Credit of duty paid on inputs is available when the inputs are used for providing an 'output service'. Therefore, there is a need to say that the inputs have been used for providing an 'output service'. In the case of 'input service', the definition includes input services used by a provider of taxable service for providing an output service. Therefore the definition of input and input service are pari material as far as the service providers are concerned. That being the position, the decision of the Hon'ble High Court of Andhra Pradesh would be applicable to the present case. In that case also, the Hon'ble High Court took the view that without use of cement and TMT bars for construction of warehouse assessee could not have provided 'storage and warehousing service.' In this case also, without utilizing the service, mall could not have be....
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....ut services clearly covers this kind of services and cenvat credit is eligible to be availed of service tax paid by EPC contractors. To that extent, it needs to be clarified that any service tax paid by the appellant himself to the service providers in respect of Engineering Consultancy, Inspection services etc. receive from other contractors directly and used in execution of the pipeline system which is used by the appellant for providing an output services i.e. "Transportation of goods through pipelines or other conduit services" they are eligible to avail CENVAT Credit. To that extent we agree that there is an error apparent on the face of our order in paragraph No. 5.2. The said error is rectified by replacing paragraph No. 5.2 as indicated hereinabove by the following paragraph No. 5.2. "The learned Special Counsel also submitted that in respect of services rendered to the contractor by other service providers, Notification No. 12/2003 does not disallow credit of service tax on such input services and therefore only contractors could have availed the credit. Therefore in such cases if the contractors did not avail the credit, appellant cannot avail. We find ourselves in agree....
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.... services relating to coating of pipes etc. The contracts with such service providers were entered into directly by the appellant with the service providers. Proceedings were initiated against the appellant which culminated in the passing of the impugned order which sought to deny service tax credit on inputs, input services and capital goods of Rs. 262.13 Crores as under: (i) On Services rendered by pipeline laying contractors (CICS, ECIS, WCS) Rs.195.75 crores (ii) Other input services availed of prior to commissioning of pipeline in March 2009 (eg: Consulting Engineer services, Rent-a-cab Services, CHA services, BAS for coating pipes, Supply of tangible goods) Rs.42.60 crores (iii) Capital goods credit availed prior to commissioning of pipeline (valves, compressor pump, pipes-all specified capital goods) Rs.23.78 crores 3. Three questions need to be answered namely: (1) Whether cenvat credit of service tax paid by the pipeline laying contractors on Works Contract Service (WCS) provided for laying the pipeline is admissible to the appellant? (2) Whether input service credit on services such as design and engineering of the pipeline, GTA services, Rent-a-cab se....
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.... be allowed to take credit (hereinafter referred to as the CENVAT credit) of - paid on- (i) any input or capital goods received in the factory of manufacture of final product or [by] the provider of output service on or after the 10th day of September, 2004; and (ii) any input service received by the manufacturer of final product or by the provider of output services on or after the 10th day of September, 2004". The Rule above clearly states that the appellants could have availed Cenvat Credit on inputs or capital goods received by them or on any input service received by them, they being a service provider providing service of "Transport of goods through pipeline or other conduit". But the pipeline erected by contractors and handed over to the appellant is neither an input nor an input service for the appellants. It is also not capital goods within the definition of capital goods as defined in Rule 2(a) of Cenvat Credit Rules which states that: "In these rules, unless the context otherwise requires,- (a) "capital goods" means, - ...................... Used- (1) in the factory of the manufacturer of the final products, but does not include any equipment or appliance used in ....
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....by the output service provider, question of availment of credit also does not arise. The definition of input service also does not help the appellants to get the credit of duty paid on pipes. The definition requires the input services to be "used for" providing an output service and it cannot be said that the inclusion clause helps them to take credit of service tax paid by the EPC Contractor we are not able to find any provision which allows them to take credit of duty paid on pipes and also service tax paid on construction of pipeline system. A conscious decision was made by the appellant and the EPC contractor to avail the benefit of Notification No. 12/2003 especially in the case of appellants, they had also taken a legal opinion. Once a choice is made the consequences of the chose also inevitably follows and has to be suffered. 3.2. As a matter of reiteration, I may state that the above judgement held that in the case of capital goods for service providers, they are required to be used for providing output service whereas the pipes are used for construction of pipeline by the contractors and the pipeline system which is immoveable property is handed over to the appellant. Sim....
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....ices provided to EPC contractors and may not be applicable to the services provided by the service providers directly to the assessee, in respect of Engineering Consultancy, inspection services, ROV/ROW Consultancy services, and paid for by the appellant directly." Reliance is placed on the decision of the Tribunal in the case of Mundra Port & Special Economic Zone Ltd. 2009 (13) S.T. R. 178 (Tri. Ahd.) wherein Tribunal observed 6. The main thrust of the appellant's argument is that the definition of input as contained in Rule 2(k)(ii) is all goods "used for providing any output service". It stands contended by them that any item which is required for the ultimate providing of the service, should be considered as an input. The expression used for providing should be construed as "used for the purpose of providing". The expression for the purpose of business stands interpreted by the Hon'ble Supreme Court to be of wide import. As they have contended that jetty is used for providing port services and cement and steel in question are used for construction of such jetty. As such it has to be held that cement and steel stand used for providing the output services. We find tha....
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....roducts upto the place of removal, and includes services used in relation to setting up, modernization, renovation or repairs of a factory, premises of provider of output service or an office relating to such factory or premises, advertisement or sales promotion, market research, storage upto the place of removal, procurement of inputs, activities relating to business, such as accounting, auditing, financing, recruitment and quality control, coaching and training, computer networking, credit rating, share registry, and security, inward transportation of inputs or capital goods and outward transportation upto the place of removal; [but excludes],- As seen from the above definition, the inclusion clause does not help the appellant because it only allows services used in relation to setting up office etc. which are premises of the provider of output service. Whereas the service tax was paid by the Contractors under the Work Contract Service for construction of pipeline system. It may be emphasized again that the contractor paid service tax on the services provided by him and not on the pipeline system as such. 4. However as also held by the Tribunal in the case of Gujarat State Pe....