TaxTMI 
TaxTMI 
2026 (7) TMI 917
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.... tanks and mechanical piping; the appellants procured stainless steel sheets/ plates, valves, bolts etc. and supplied by the appellants to the contractors; the contractors purchased other inputs like tools, tackles, plant and equipment required for the fabrication of tanks; the appellants reimbursed the tax paid on the items to the contractors procured by them; the invoices for items procured by the contractors on their own showed the appellants to be the consignee. The appellants availed CENVAT credit on such inputs procured by them as well as those procured by the contractors. On conduct of an audit, Revenue entertained an opinion that the tax paid on the raw material required for the fabrication of storage tank and piping is not admissible to the appellants as they are raw material/ inputs for the contractor and not the appellants. A show cause notice, dated 02.05.2013, covering the period 01.04.2008 to 07.03.2013, demanding Cenvat Credit of Rs 10,68,46,038, was issued. Another Show Cause Notice, dated 25.09.2013, covering the period 01.04.2009 to 28.04.2012, demanding Cenvat credit of Rs 31,99,88,570 was issued. The proposals in the show cause notices were confirmed vide Orders....
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....on (ii) of Rule 2(k) of the Credit Rules, all goods which are used for providing the output service would qualify as 'inputs'; the ambit of "all goods...used for providing any output services", is quite wide to not only include the goods directly used for providing output services, but also includes all goods indirectly used for providing output services as well, as held in Bharti Airtel Ltd 2025 (391) ELT 3 (SC); the raw materials are used for fabricating the floating roof tanks which are used by the Appellant M/s HMPL for receiving and storing crude oil which is further transported to HMEL through pipelines i.e. providing the output services. He submits that there is no change in the definition of the 'inputs' for service provider post 1.4.2011; any goods used for providing output service qualify as inputs. 6. Learned Counsel for the appellants submits in addition that the excise duty for the raw materials was borne by the Appellants; the impugned Orders have not disputed the payment of excise duty, the credit availed on the same goods should also not be denied to the Appellants; further, the Contractors confirmed that no credit has been availed by them in respect of the input....
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..... - LB), to hold that the rule making authority never intended to include goods such as steel, which are used in fabrication of immovable capital goods, which are further used in manufacturing the final product in the definition of 'input'., is incorrect; the said judgement has been overruled by the Hon'ble High Court of Chhattisgarh 2018 (16) GSTL 462 (Chhattisgarh) holding that goods like steel that are used in fabrication of capital goods, are to be treated as 'input' in relation to their final products, in accordance with Rules 2(a)(A) and 2(k) of the Credit Rules; moreover, the finding is beyond the Show Cause Notice. Learned Counsel also relies on IOL Chemicals and Pharmaceuticals Ltd., (2023) 8 Centax 88 (P & H) affirmed by Supreme Court (2023) 10 Centax 180 (S.C.) and Winsome Yarns Ltd (2023) 8 Centax 202 (P&H.); In any case, this finding of the Authority is beyond the SCN itself. 10. Learned Counsel for the appellants submits further that Rule 9 of the Cenvat Credit Rules, 2004 lays down the documentary requirement in the form of an invoice, read with the provisions of Central Excise Rules, 2002 and Service tax Rules, 1994, on the basis of which an assessee is entitled ....
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....s no provision in the statutory returns to show the usage of inputs in respect of which credit was availed; in the absence of such provision, the Appellant cannot be held to have concealed facts; moreover, the Appellants were under bona fide belief that they are rightfully availing the credit; hence, extended period of limitation could not be invoked as held in M/s Socomec India Private Limited Final Order No. 60436/2025, dated 26.03.2025 (Tri. - Chan.), M/s GD Goenka Private Limited Final Order No. 51088/2023, dated 21.08.2023 (Tri. -New Delhi) and M/s Good Year Final Order No. 60572-60573/2024, dated 04.10.2024 (Tri. - Chan.). 12. Learned Counsel submits that since demand is not sustainable, interest and penalty cannot be impose; as already discussed above, there was no suppression on part of the Appellants and no mala-fide intention can be attributed to the Appellants and thus, no penalty is imposable under Rule 15 of the Credit Rules and Section 11AC of the Act/ Section 78 of the Finance Act; in view of provision of Section 11AC(1)(b) of the Act, only penalty up to 50% of the duty demanded could have been imposed as the details of the transactions are available in the specif....
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....ned goods were at first made by the contractors, either by way of purchasing the impugned goods from other manufacturers or by procuring the same from the appellants, free of cost; the contractors had an option to pay Service tax as per Rule 2A of the Service tax (Determination of Value) Rule,2006, as amended or to pay service tax under "Work Contract (Composition Scheme for Payment of Service Tax) Rules 2007/2009; further, both of them provide that the gross amount or value includes the value of all goods used in or in relation to the execution of the works contract, whether supplied under any other contract for a consideration or otherwise; it is clear that the value of the impugned goods was included in the gross value of the contractors to render work contract services. 15. Learned Authorized Representative further submits that when the contractor is not eligible to take Cenvat credit, the same cannot be made permissible to be taken by the appellant for whom work contract services are being rendered; when there are more than one transactions, then the transactions are to be dealt one by one (sequentially) ; it is not the intent of the Law that both will take credit; as per s....
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....e was about denial of Cenvat credit on the basis of wrong mentioning of description of the goods in RG-23A Pt. I. (vi). the case of International Tractors Ltd. 2010 (255) ELT 196 was about the admissibility of Credit when the other party M/s. Haden Josts Engineering India Ltd. had not taken any Modvat Credit. 16. Learned Authorized Representative submits that the decision in the case of Bharat Oman Refineries Ltd 2017(4) GSTL 221(Tri-Delhi) is applicable to the instant case, appeal No. ST/54247/2014, as the facts of the cases are identical and comparable. Both the disputed goods/inputs purchased by the contractor and supplied by the appellant were used by the contractor for providing works contract service under the scheme of Works Contract (Composition scheme for payment of service tax) Rules, 2007; this scheme of payment of service tax provides a concessional rate of service tax subject to condition that Cenvat credit involved on the inputs and input services used in relation to providing the taxable services specified under the scheme was not availed; as the contractor had paid service tax under the aforementioned scheme at the concessional rate, it was contractor's ....
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....atement given by their officials, while the revenue called from them the details of the disputed goods issued by them to the contractors and payment made by the appellant to the contractors involved on the inputs purchased by the contractors on their own account; even after that from the earlier period the appellant only supplied details w.r.t. limited to a few purchase orders; never supplied all details at a time, though the same official were asked for that said details; thus, the appellant suppressed facts, which clearly intended to evade payment of tax by way of taking credit on the inputs which was used by the contractor only and the contractor was paying service tax under Works contract Rules,2007. Further, the case laws relied upon by the appellant are not relevant to the facts of the present case, as the period involved in those cases are earlier to the 01.06.2007, when the works contract services came into existence. And for others case laws the facts are not identical to the present case. 19. Learned Authorised Representative submits on the issue of extended period that though the appellants claim that they are registered assesses and were regularly filing returns, tho....
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....M/s HMEL required 'mechanical piping' 'storage tanks', etc, for manufacture and storage of petroleum products. They engaged 2 contractors - M/s. Bridge & Roof Co. (India) Ltd and M/s Artson Engineering Ltd, for fabrication of 'storage tanks; under the agreements M/s HMEL procured the Stainless-Steel Sheets/Plates ('S.S. Sheets/ Plates'), valves, bolts etc. on their own and provided to the contractors at free of cost; the other input materials like tools, tackles, contractor plant & equipment required for the completion and maintenance of the work of fabrication of storage tanks and mechanical piping etc were procured by the contractors; excise duty and service tax on such inputs paid by the contractors was duly reimbursed by M/s HMEL; S.S Sheets/ plates and all other inputs procured by M/s HMEL were directly received in the factory premises and in respect of the inputs procured by the contractors, M/s HMEL were mentioned as 'consignee' in the invoices. 22. The brief issue that needs to addressed in these appeals is as to whether M/s HMEL (a manufacturer) is entitled to avail cenvat credit, on the inputs, purchased by them or by contractors on their behalf and used in their premi....
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....oil, high speed diesel oil, motor spirit, commonly known as petrol and vehicles, used for providing any output service Explanation 1.- The light diesel oil, high speed diesel oil or motor spirit, commonly known as petrol, shall not be treated as an input for any purpose whatsoever. Explanation 2.- Input include goods used in the manufacture of capital goods which are further used in the factory of the manufacturer." 24.1. Further, Rule 2(a) of the Credit Rules provides for the definition of capital goods. Relevant extract of the same is reproduced as under: "(a) "capital goods" means - (A) the following goods, namely: - (i) all goods falling under Chapter 82, Chapter 84, Chapter 85, Chapter 90, heading 6805, grinding wheels and the like, and parts thereof falling under heading 6804 and wagons of sub-heading 860692 of the First Schedule to the Excise Tariff Act (ii) pollution control equipment ... (vi) tubes and pipes and fittings thereof; (vii) storage tanks and ... used- (1) in the factory of the manufacturer of the final products, or ...;" 24.2 We fund that P....
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....read with section 95 of the Finance (No.2) Act, 2004 (23 of 2004), paid on- (i) any input or capital goods received in the factory of manufacture of final product or premises of 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,including the said duties, or tax, or cess paid on any input or input service, as the case may be, used in the manufacture of intermediate products, by a job-worker availing the benefit of exemption specified in the notification of the Government of India in the Ministry of Finance (Department of Revenue), No. 214/86- Central Excise, dated the 25th March, 1986, published in the Gazette of India vide number G.S.R. 547 (E), dated the 25th March, 1986, and received by the manufacturer for use in, or in relation to, the manufacture of final product, on or after the 10th day of September, 2004. Explanation. - For the removal of doubts, it is clarified that the manufacturer of the final products and the provider of output service shall be allowed CENVAT credit....
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....rements of Rule 9 of the CCR 2004. 26. We shall discuss about the abatement. Abatement in Service Tax refers to a partial exemption where only a specified percentage of the transaction value is taxable, and the remaining portion is excluded from the taxable value. This typically happens where the service provider also supplies some goods along with the services. In such cases, consideration received by him is inclusive of value paid for goods. Since service tax is leviable on the service component, value of goods should not be included in the assessable value. Therefore, abatement was provided as a matter of administrative simplification since tracking exact value of service portion was impractical. Service providers providing works contract service get exemption under the scheme of Works Contract (Composition scheme for payment of service tax) Rules, 2007; this scheme of payment of service tax provides a concessional rate of service tax subject to condition that Cenvat credit involved on the inputs and input services used in relation to providing the taxable services specified under the scheme was not availed. 27. In the instant case, we understand that a manufacturer has en....
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....the goods or their belongingness to a person. The primary and essential condition required is that the goods must be duty paid and must be used in or relation to excisable goods directly or indirectly in the factory of production. These facts are not denied by the Revenue. 31. The Hon'ble Supreme Court in the case of Bharti Airtel Ltd. Versus Commissioner of Central Excise, Pune 2025 (391) E.L.T. 3 (S.C.) has noted that "input" in relation to manufacturing of final product would mean not only those which are directly used but also indirectly used and not only for manufacture of final product whether contained in the final product or not but also used in relation to manufacture of final product or for any of other purpose. In view of the same, we find that there is no reason as to why the Cenvat Credit availed by the appellants be denied. Therefore, as far as the first scenario, where the said contractor-service provider has not availed the benefit of abatement, is concerned entitlement of the appellants to credit cannot be denied. 32. We now take up the issue of the second scenario, where the contractor-service provider has availed the benefit of abatement. We held above that....
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.... of the Act, by paying an amount equivalent to 1[four per cent.]of the gross amount charged for the works contract . 2 [Explanation. - For the purposes of this sub-rule, gross amount charged for the works contract shall be the sum, (a) including (i) the value of all goods used in or in relation to the execution of the works contract, whether supplied under any other contract for a consideration or otherwise; and (ii) the value of all the services that are required to be provided for the execution of the works contract ; (b) excluding (i) the value added tax or sales tax as the case may be paid on (ii) the cost of machinery and tools used in the execution of the said works contract except for the charges for obtaining them on hire: Provided that nothing contained in this Explanation shall apply to a works contract, where the execution under the said contract has commenced or where any payment, except by way of credit or debit to any account, has been made in relation to the said contract on or before the 7th day of July, 2009.]; (2) The provider of taxable service shall not take CENVAT credit of duties ....
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....AT credit for the goods which are actually the inputs for the supplier contractor who opted for Composite Scheme for payment of Service Tax. 6.3 When the CENVAT credit is not available to the contractor, the said Cenvat credit cannot be passed on to the Appellant namely M/s Bharat Oman Refineries Ltd. The CESTAT in the case of M/s Gauri Plasticulture Pvt Ltd. (SUPRA) has held that what cannot be done directly is not to be allowed to be done indirectly. In this case when CENVAT credit on the input goods is not to be allowed to the contractor, who is service provider, the same cannot passed on indirectly to the Appellant, M/s Bharat Oman Refineries Ltd. The case laws cited by the Appellant are not applicable to the present facts. The contractor has paid service tax under the Composite Scheme, where they have paid service tax at the reduced rate of 4% instead of payment of standard rate of service tax @ 10%. When contractor M/s Petron Engineering Construction Ltd. have exercised this option, they cannot directly or indirectly pass on the CENVAT credit of any input goods to the Recipient of their services. Under the CENVAT scheme the CENVAT credit is passed on by using the inv....