TaxTMI 
TaxTMI 
2026 (5) TMI 438
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....hey were also availing Cenvat Credit facility as per the provisions of Cenvat Credit Rules, 2004. During the course of audit and scrutiny of financial records for the period from February, 2013 to March, 2015, it was noticed that the appellant had taken Cenvat Credit of service tax paid on Civil Construction Services and Works Contract Services totally to the tune of Rs. 16,67,562/(Rs.7,71,957/- on Civil Construction and Rs. 8,95,605/- on Works Contract for Civil Construction) as input services. Later on, the appellant reversed the Cenvat Credit of Rs. 7,71,957/- but did not agree to reverse the Cenvat Credit taken on Works Contract Services meant for Lagoon Yard (effluent treatment for water). The department was of the view that the assessee had availed service tax credit in respect of services used for Civil Construction and Works Contract i.e. Construction of Bio-Compost Yard and Storage lagoons in their factory premises but these services are not admissible as input services in terms of Rule 2(1) of Cenvat Credit Rules, 2004. Therefore, a show cause notice dated 17.08.2015 was issued to the appellant for disallowing the Cenvat Credit of Rs. 16,67,562/- and demanding the same al....
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....he appellant and upheld the Order-In-Original passed by the Adjudicating Authority and observed that the service portion in the execution of a works contract is specifically excluded from the scope of "input service", thus the claim of the appellant that they are eligible to credit on "works contract services" is not sustainable even though such services are used for construction of Effluent Treatment Plant. The Rule does not provide any exception for civil construction of Effluent Treatment Plant. Thus in absence of any specific provision, credit availed on "works contract services" would not qualify as "input service" and the same cannot be allowed to the appellant. 1.5 Feeling aggrieved from the impugned Order-In-Appeal dated 12.01.2022, the present appeal has been preferred before this Tribunal. 2. The Learned Counsel for the Appellant submitted that the Appellant is Cooperative Sugar Factory manufacturing dutiable goods. During February 2013 to March, 2015, the Appellant availed Cenvat Credit of Rs. 16,67,562.00/- on "Civil Construction" and "Works Contract Services". The Appellant availed Rs. 7,71,957.00/- on "Civil Construction" and Rs. 8,95,605.00/- on "Works Contract....
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....te generated in the factory of the appellant. The contention of the Revenue is that the effluent treatment of waste is not related to manufacture of final product, therefore, it does not have nexus with the manufacturing activity of the appellant. We do not agree with this contention of the Revenue for the reason that as per the Pollution Control Act, it is mandatory for every industrial unit to treat the effluent waste generated during the manufacture of final product, therefore, the industrial unit cannot carry out the production without compliance of pollution control norms which includes effluent treatment of waste generated during the manufacturing activity. Therefore, the effluent treatment of waste is necessary for overall manufacturing activity of the industrial unit. This issue has been considered in the various judgments which are as follows: - (a) Indian Farmers Fertilizers Cooperative Ltd.Vs. Collector-1996 (86) ELT 177 (S.C) (b) Cheminova India Ltd. Vs. CCE & ST, ST, Surat-II-E/11731/2014-Final Order dated 28.06.2023. (c) Commissioner of Central Excise and Service Tax-Surat Vs. Konoria chemicals & Industries Ltd-2015 (7)TMI 970 (CESTAT Ahmeda....
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....hmedabad vide Final Order No. A/11398-11401/2023 dated 28.06.2023 held that as per the provisions of Pollution Control Act, 1981 if the effluent generated in the manufacture is not treated, the appellant shall not be able to run their factory. In this undisputed position, the effluent treatment activity is necessary to carry out the uninterrupted production of the final product in the appellant's factory. Therefore, the conclusion can be conveniently drawn that the effluent treatment activity is a vital part of overall manufacturing of the final product and if this be so then the input services used for "effluent treatment" are admissible as "input service". The relevant part of the order is being reproduced below:- "07. We have carefully considered the submissions made by both the sides and perused the records. Since all the appeals are on the same issue though heard on different dates i.e. 20.04.2023 & 29.05.2023, we are deciding all the appeals together. We find that the revenue has denied the cenvat credit on services related to the effluent treatment activity of the waste generated during the course of manufacture of the final product of the appellant. The denial of c....
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.... Indian Farmers Fertilizer Co-op. Ltd Vs CCE Ahmedabad (supra), where duty free raw material Naptha used for effluent treatment plant, was held to be eligible for exemption. Para 9 of this case law is relevant and is reproduced below:- "9. That leaves us to consider whether the raw? naphtha used to produce the ammonia which is used in the effluent treatment plant is eligible for the said exemption. It is too late in the day to take the view that the treatment of effluents from a plant is not an essential and integral part of the process of manufacture in the plant. The emphasis that has rightly been laid in recent years upon the environment and pollution control requires that all plants which emit effluents should be so equipped as to rid the effluents of dangerous properties. The apparatus used for such treatment of effluents in a plant manufacturing a particular end-product is part and parcel of the manufacturing process of that end-product. The ammonia used in the treatment of effluents from the urea plant of the appellants has, therefore, to be held to be used in the manufacture of urea and the raw naphtha used in the manufacture of such ammonia to be entitled to the s....
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....mers Fertilizer Cooperative Ltd. referred supra, has held that pollution control apparatus/device used in plant are to be treated as part and parcel of manufacturing process for production of end product. Further, on going through the ratio of law declared in the above judgment, is to the effect that definition of input services is wide and take into its ambit all the activities relating to the functioning of business. Admittedly, the Pollution Control Board requires the appellant to maintain Effluent Treatment Plant upto a certain standard and all the services used by the assessee for maintenance of such standard has to be held as activities relating to business. In the case of Brakes India Ltd. referred supra, it was held that creation and maintenance of garden within the factory premises by treating industrial and domestic sewage water, is mandatory requirement from Pollution Control Board and the man power services used for garden maintenance are required as infrastructure for manufacture and clearance of final product and the credit is admissible in respect of the same. Similarly, in the case of Coca Cola India Pvt. Ltd. referred supra, it stand held that the expression "busin....
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....input service" means any service,- (i)used by a provider of taxable service for providing an output service; or (ii) used by the manufacturer, whether directly or indirectly, in or in relation to the manufacture of final products and clearance of final products from 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............ From a plain reading of Rule 2(l), it is clear that even though setting up of factory was removed from the exclusion clause however, the service of modernization, renovation or repair and maintenance is still provided in the inclusion clause. There....
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.... factory continued to be in the said definition even after 1 4-2011. He submits that exclusion clause inserted with effect from 1-4-2011 should be read in the context while interpreting the applicability of exclusion clause. The Ld. Advocate submits that the 'construction service' excluded from the scope of 'input service' be limited to 'new construction' required in 'setting up' of a factory, however, cannot be made applicable to activities relating to 'repair, renovation and modernization' of the existing factory building, plant and machinery. In support, the Ld. Advocate referred to the clarification at Para 4 of the Circular No. 943/4/2011-CX, dated 29-42011 issued by the Board. It is his contention that there is no dispute to the fact that the 'construction service' had been utilized by the appellant in 'renovation and repair' of the factory in compliance with the requirement of USA, FDA guidelines. Therefore, credit is admissible to them. 4. The Ld. AR for the Revenue reiterated the findings of the Ld. Commissioner (Appeals). 5. Heard both sides and perused the records. 6. The short issue involved for determination in the present case is : whether t....
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....place of removal, and includes services used in relation to 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 up to the place of removal, procurement of inputs, accounting, auditing, financing, recruitment and quality control, coaching and training, computer networking, credit rating, share registry, security, business exhibition, legal services, inward transportation of inputs or capital goods and outward transportation up to the place of removal; but excludes, - (A) service portion in the execution of a works contract and construction services including service listed under clause (b) of Section 66E of the Finance Act (hereinafter referred as specified services) in so far as they are used for - (a) construction or execution of works contract of a building or a civil structure or a part thereof; or (b) laying of foundation or making of structures for support of capital goods, except for the provision of one or more of the specified services; or (B) services provided by way of renting of a ....
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....cture of their products therefore, the service tax paid on such construction service is eligible to credit. In the result, the impugned order is set aside and the appeal is allowed with consequential relief, if any, as per the law." 6. From the above judgment of this Tribunal it can be seen that the amended definition of 'Input Service' from 01.04.2011 was considered and it was viewed that though the construction service/ works contract service were excluded but it was interpreted that the said service related to only new construction or setting up of a new factory. But since modernization, renovation or repair and maintenance, even after exclusion category, continue to remain in inclusion clause of definition, credit cannot be denied. Moreover, the show cause notice has not made any charge related to exclusion category of 'Input Service', it only deals with main clause and inclusion clause of definition. Therefore, the adjudication order deciding the matter on the basis of exclusion category is beyond the scope of show cause notice. As per the discussion made hereinabove which gets support from the Tribunal judgment in the cited case, the appellant is entitled for Cenvat ....