TaxTMI 
TaxTMI 
2026 (8) TMI 1211
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....t for procurement assistance, erection, commissioning and installation service, laying foundation and making structures, fabrication, Professional and Management Consultancy service, Vastu and Architecture for setting up of new building, new plant etc. As per Revenue, definition of "input service" under rule 2(l) of the Cenvat Credit Rules, 2004, has undergone change w.e.f. 01.04.2011, therefore, credit on input services used for setting up of factory is not admissible. 1.2 Two show cause notices, one dated 16.06.2017 covering the period from July-2013 to December-2015 for disallowing Cenvat Credit of Rs.57.80 Lakhs and the second one (statement of demand) dated 02.04.2018 covering the period from March-2016 to June-2017 involving Cenvat credit of Rs.20.36 Lakhs were issued. In adjudication proceedings, demand of above Cenvat Credit were confirmed under Section 11A(4) of the Central Excise Act, 1944 read with Rule 14 of the CCR, 2004 along with interest under Section 11AA of the Central Excise Act. Equal penalty was also imposed on the appellant under Rule 15(2) of the CCR, 2004 read with Section 11AC of the Central Excise Act, 1944. Aggrieved with the above order, the appellant....
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....uto Components India Pvt. Ltd. reported at 2015 (40) S.T.R. 41, Hon'ble Punjab and Haryana High Court held that services of constructing a factory would be covered under the main part of definition of input service as per Rule 2(l) of the CCR,2004 because factory would necessary for carrying out manufacturing activity or providing output services, even though construction services were for 'setting up' of the factory. * Hon'ble Supreme Court in the case of J.K. Cotton Spinning & Weaving Mills Company Limited Vs. Sales Tax Officer reported at 1997 (91) ELT 34 (S.C.) has held that the phrase "in the manufacture of goods" should not be restricted to the process of production of goods and must also encompass processes in relation to the manufacturing activity. * Input services availed by them qualify under the phrase 'includes' appearing in Rule 2(l) as renovation or modernization or repairs of a factory. Therefore, credit availed by them is legally correct. They rely on the decision in the case of Musaddilal Projects Ltd. Vs. CCE & ST reported at 2017 (4) G.S.T.L. 401 (Tri.- Hyd.). * Para 5.8 of the Impugned OIA has disregarded the Tribun....
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....eels Limited-2012 (280) E.L.T. 176 (Kar) iv. Ispat Industries Limited Vs. CCE-2006 (195) ELT 164 (Tri.-Bom.), { Alos upheld by Mumbai High Court vide Order dated 19.7.2007 in Central Excise Appeal No.187 of 2006} v. Lloyds Steel Industries Vs CCE-2004 (64) RLT 732 (Tri.-Bom.), {upheld by Mumbai High Court (Nagpur Bench) vide Order Dated 13.06.2007 in Central Excise Appeal No.74 of 2004} vi. Union of India Vs Associated Cement Company-2011 (267) ELT 55 (Chhattisgarh). vii. CCE Vs ICL Sugars Limited-2011 (271) ELT 360 (Kar) viii. Mahalakshmi Glass Works Ltd. Vs CCE, Mumbai-I-1999 (113) ELT 558 * The impugned OIAs cannot travel beyond the scope of notice to level fresh allegations to deny Cenvat Credit. They rely on the decision of Hon'ble Supreme Court in the case of CCE Vs. Champdany Industries reported at 2009 (241) E.L.T. 481 (S.C.) which held that Revenue cannot argue case not made out in the show cause notice. * Appellate Authority has relied on the decision of Hon'ble Karnataka High Court in the case of Suraj Enterprises reported at 2010 (262) ELT 119 (Kar.) which is distinguishable on facts. The issue therein w....
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....ument, learned Advocate mentioned that CESTAT Hyderabad in the case of Pepsico India Holdings (Pvt.) Ltd. reported at 2021 (7) TMI 1094 has clearly held that Cenvat Credit on "input services" used in setting up of their plant at the Industrial Township called "Sri City" is admissible, even after amendment in the definition of input services under Rule 2(l) of the CCR, 2004 which omitted the phrase "setting up" w.e.f. 01.04.2011. It has been held in the said decision that definition of input service has main clause as well as inclusive clause. Varius services which fall within the inclusive clause will be entitled for the Cenvat Credit even after 01.04.2011. 3.1 Learned Advocate also relied on the decision of CESTAT Bangalore in the case of M/s. Shell India Pvt. Ltd. where Tribunal had allowed Cenvat Credit on various disputed input services after the term "setting up" has been omitted from the definition of input services. The appeal filed by revenue against this order was rejected by Hon'ble Karnataka High Court vide order reported at (2025) 27 CENTAX 444- (KAR) by replying the question of law in favour of the appellant. Relying on the decision of CESTAT Bangalore in the case o....
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....decision of CESTAT Bangalore in the case of M/s. Shell India Pvt. Ltd. and in case of Zuari Cement Ltd and the decision of CESTAT Hyderabad in the case of Pepsico India Holding (Pvt.) Ltd. We find that this issue was discussed in detail by CESTAT Hyderabad in M/s. Pepsico India case where assessee entered into a lease agreement for 99 years with M/s. Sri City for lease of land to setting up of a manufacturing plant. M/s. Sri City paid service tax on the consideration amount charged for leasing the land as well as on the amount charged as development services, credit of which was availed by M/s. Pepsico besides credit of service tax paid on consultancy service availed for setting up of the plant. They were issued show cause notice for denial of Cenvat Credit on above services which was allowed by the Tribunal. Relevant paras 16-23 of the said decision are reproduced below:- "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 inclus....
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....nder CENVAT Credit Rules, 2004 post 2011, the service in question need not be covered even by the very wide definition of manufacture under section 2(f) of the Central Excise Act. Any service which is used not only in manufacture but also 'in relation to' manufacture will also qualify as input service. The scope of input service is further enlarged with the expression whether directly or indirectly used in the definition of input service. Thus, there are: a) Actual manufacture; b) Processes incidental or ancillary to manufacture which are also manufacture; c) Activities directly in relation to manufacture (i.e., in relation to 'a' and 'b' above); d) Activities indirectly in relation to manufacture (i.e., in relation to 'a' and 'b' above); 22. All four of the above qualify as input service as per Rule 2(l) (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 (l) (ii) of....
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....es, used for setting up the new project namely, Technology Centre, consequent upon amendment brought into Rule 2(l) ibid vide Notification No.3/2011- C Ex.(NT) dated 1.3.2011, effective from 1.4.2011. 5.1 The period of dispute involved in this case is from October 2011 to March 2016. The definition of 'input service' was amended with effect from 1.4.2011. under the un-amended definition, the phrase 'setting up' was specifically provided in the inclusive part for consideration as input service. However, the said phrase was deleted in the amended definition from 1.4.2011. Accordingly, the department had entertained a belief that in view of deletion of such phrase in the definition clause, the appellant should not be eligible for the benefit of consideration of the disputed services as input service. On perusal of the definition of 'input service' contained in the CENVAT statute, it transpires that the services used either directly or indirectly, in or in relation to the manufacture of final product should be considered as input service. In this case, it is an undisputed fact that the appellant had availed CENVAT credit on the disputed services for setting up of new Technolog....
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....ct 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." 6. In view of the foregoing discussions, we do not find any merits in the impugned order insofar as it has denied the CENVAT benefit and confirmed the adjudged demands on the appellant. Therefore, by setting aside the impugned order, the appeal is allowed in favour of the appellant." 5.3 This decision has been upheld by Hon'ble Karnataka High Court vide order dated 01.12.2022 reported at 2023 (1) TMI 147- KAR by which appeal of Revenue was dismissed. During argument, learned Advocate of the respondent had submitted that "assessee has not claimed any CENVAT credit towards "fresh construction". Hon'ble Court observed that admittedly, assessee has claimed CENVAT credit on following heads: * Consulting Engineer Servic....