TaxTMI 
TaxTMI 
2026 (7) TMI 1845
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....7. 1.1 The facts of the case in brief are that during the course of audit of Service Tax records under EA-2000 it was observed by the department that the appellant has availed Cenvat Credit of Service Tax amounting to Rs. 32,84,099/- from January-2017 to June-2017 and the same has been transferred in TRAN-1 returns. It was further observed that the appellant has availed Service Tax Credit of Rs. 32,84,099/- on setting up services used for fabrication, erection of pipeline, welding, cutting, flange fixing and other services prior to commercial production which is not covered under the definition of Input Services "under Rule 2(l) of the Cenvat Credit Rules, 2004. The department was of the view that the services availed have no relation or nexus with the manufacturing of the finished goods and also w.e.f. 01.04.2011, vide Notification No. 03/2011 C.E. (NT) dated 01.03.2011, the phrases 'setting up' and 'activities relating to business' have been removed from the inclusive part of the definition and are not covered under the definition of 'input service' as provided under Rule 2(l) of the Cenvat Credit Rules, 2004. 1.2 In view of the above observations, a Show Cause Notice dated....
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....und that the words ' setting up' have been removed from the definition of 'input service' w.e.f. 01.04.2011. However, we find that the appellant has not availed credit in respect of civil works undertaken by them for setting up of the plant. They have only availed the credit in respect of services such as banking and other financial services, management, maintenance and repair services, rent-a-cab services, GTA services, legal consultancy services, erection, commissioning and installation services, etc. which are all 'input services' in terms of Rule 2(l) of the Cenvat Credit Rules, 2004. Thus, we find that the appellant is eligible to avail Cenvat Credit in respect of the above mentioned services. The Tribunal allowed the appeal and set aside the demand. 2.3 The learned Counsel for the appellant also submitted that extended period has been wrongly invoked by the Revenue and the demand is time barred as there is no suppression and wilful mis-statement on the part of the appellant. He has supported his argument by the law laid down in Jamshedpur Continuous Annealing and Processing Company Pvt Ltd vs. Commissioner reported in 2025 (10) LCX388 in which it was held that so far as th....
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....ut service after 01.04.2011 is not impactable to them", is not sustainable. 3.2 The learned AR submitted that the impugned order has been passed by the learned Commissioner in accordance with Rule 3(l) of the Cenvat Credit Rules, 2004, therefore, the impugned order may be upheld and the appeal may be rejected. 4. I have heard the learned Counsel for the appellant and the learned AR for the department and perused the records. 4.1 The issue to be decided by the Tribunal is whether the appellant is eligible for Cenvat Credit on setting up services used for fabrication, erection of pipelines, welding, cutting, flange fixing and other services prior to commencement of commercial production in terms of Rule 2(l) of Cenvat Credit Rules, 2004? 4.2 Admitted facts of this case are that the appellant has availed Service Tax credit of Rs. 32,82,099/-, on setting up services used for fabrication, erection of pipeline, welding, cutting, flange fixing and other services prior to commercial production in the factory. The learned Adjudicating Authority and the learned Commissioner arrived at the conclusion that the above mentioned 'setting up services' are not covered under the definiti....
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....tion 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: 4.4 From the perusal of the definition of the phrase 'input service' as mentioned above, it is clear that the definition excludes "services portion" in construction services in so far as they are used for construction of a building or a civil structure or a part thereof. In the present case, the services under dispute are fabrication, erection of pipelines, welding, cutting, flange fixing and other services. Therefore, the question is whether these services are excluded from the definition of 'input services' in terms of Rule 2(l) of the Cenvat Credit Rules, 2004. 4.5 In Commissioner of Central Excise, Raipur vs. Vimla Infrastructure Pvt Ltd reported at 2018 (03) LCX 14, Hon'ble Chhattisgarh High Court has held as follows:- "9. The respondent was issued show cause notice by the Commissioner on the ground that it has wrongly availed and utilized Cenvat credit and inadmissible Input Service Tax in Central Excise du....
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....ioner of Central Tax, Service Tax Appeal No. 30122 of 2018- CESTAT, Hyderabad held as follows:- 16. We find that the definition of 'Input service' prior to 1.4.2011 had two parts- a main part of the definition and an inclusive part of the definition. This inclusive part specifically included the services availed for setting up the factory. After 1.4.2011, it has three parts a main part, an inclusive part and an exclusive part. The services used for setting up the factory are neither in the inclusive part of the definition nor the exclusive part of the definition. Therefore, such services were neither specifically included nor were specifically excluded. 17. It takes us to the main part of the definition which must be examined. If it is wide enough to cover the services in question, CENVAT credit will be available, otherwise it will not be available. The main part includes "services used by a manufacturer, whether directly or indirectly, in or in relation to the manufacture of final products and clearance of final products up to the place of removal. The term manufacture is not defined in the Rules. 18. The definitions as per rule 2 of CCR 2004 rea....
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....(i.e., in relation to 'a' and 'b' above); 22. All four of the above qualify as input service as per Rule 2(1) (ii) as applicable post 1.4.2011. Although setting up the factory is not manufacture in itself, it is an activity directly in relation to manufacture. Without setting up the factory, there cannot be any manufacture. Services used in setting up the factory are, therefore, unambiguously covered as 'input services' under Rule 2 (1) (ii) of the CENVAT Credit Rules, 2004 as they stood during the relevant period (post 1.4.2011). The mere fact that it is again not mentioned in the inclusive part of the definition makes no difference. Once it is covered in the main part of the definition of input service, unless it is specifically excluded under the exclusion part of the definition, the appellant is entitled to CENVAT credit on the input services used. This Bench has already taken this view in Kellogs. Similar views have been taken by the other Benches in the other cases mentioned above. 23. In view of the above, the impugned orders denying CENVAT credit and ordering its recovery along with interest and imposing penalties cannot be sustaine....
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.... manufacturing the final product. The perusal of earlier Order-in-Original reflects that the Department had initially observed that, all the machines in sponge iron plant can become operational or can function only when the design and layout parameters are met. Such design and layout parameters specify the location, height, angle of inclination of the machines and alignment with other related machinery so that the desired result are obtained from the machinery. The kilo cooler hopper or material handling system in a sponge iron plant cannot be suspended in air. Only the structural support for all these machines can facilitate the desired location, height, angle of inclination of the machine. In the absence of the structural support neither the machine can be installed nor it can function nor it can be aligned with other related machinery to produce desired results."... 8. We also find that the user test principles have also been recently followed by the Hon'ble Madras High Court in the case of The Ramco Cements Limited(in Order dated 11.10.2017) wherein the Hon'ble High Court followed its earlier decision dated 10.07.2017 in Thiru Arooran Sugars vs. CESTAT....
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....at by both of them is not sustainable. The Services in question come within the definition of the 'input service' in terms of Rule 2 (l) of Cenvat Credit Rules, 2004. Therefore, the Order-in-Original through which the Cenvat Credit of Rs. 32,84,099/- was ordered to be recovered under Rule 14 of the Cenvat Credit Rules, 2004 read with Rule 11A (4) of the Central Excise Act is liable to be set aside and it is held that credit of the services under contention are eligible credit in terms of the provisions of Cenvat Credit Rules, 2004 and have been rightly availed and utilized by the appellant. 4.9 The learned Commissioner has also observed in the impugned order that as the inadmissible Cenvat Credit were availed and utilized and the facts were suppressed from the department, it shows the wilful intention to evade the duty, therefore, extended period of limitation is rightly invoked in the present case and they are also liable to pay penalty under Rule 15(2) of the Cenvat Credit Rules, 2004 read with Section 11AC of the Central Excise Act, 1944. 4.10 Regarding the above observations made by the learned Commissioner in the impugned order, it is pertinent to mention here th....