2015 (2) TMI 1235 - AT - Service Tax

CENVAT credit - input service - commercial construction services - Rule 2(l) of the CCR - Held that - service which is used in relation to setting up of factory or an office, relating to such a factory is input service - As construction service used by the respondent is only for setting up of their factory, therefore as per the provisions of Rule 2(l) itself allowed the appellant to avail CENVAT credit on these services of service tax paid by them - credit allowed - appeal dismissed - decided against Revenue.

Summary

Issues:
- Appeal against allowing input service credit for commercial/industrial construction service
- Interpretation of Rule 2(l) of Cenvat Credit Rules, 2005

Analysis:
The appeal in this case revolves around the allowance of input service credit to the respondent for service tax paid on commercial/industrial construction services. The Revenue contended that the construction services lacked nexus to the manufacturing activity of the respondent, seeking to deny Cenvat credit for the period from June 2005 to September 2010 based on Rule 2(l) of the CCR, 2005. The learned AR argued against the entitlement of the respondent to the credit, while the respondent's Counsel supported the impugned order.

Upon considering the submissions, the Tribunal delved into the definition of 'input service' as per Rule 2(l) of the Cenvat Credit Rules. The rule specifies that services used in relation to setting up a factory or an office pertaining to the factory qualify as 'input services.' Since the construction services were utilized solely for establishing the respondent's factory, they fell within the ambit of 'input services' as defined by Rule 2(l). Consequently, the Tribunal found that the appellant was eligible to avail Cenvat credit on the service tax paid for these construction services. As a result, the Tribunal concluded that the show cause notices were unnecessary, and the proceedings against the respondents were unwarranted. Upholding the decision of the learned Commissioner (Appeals) to allow the Cenvat credit, the Tribunal dismissed the appeals filed by the Revenue.

In summary, the judgment clarifies the interpretation of Rule 2(l) of the Cenvat Credit Rules, emphasizing that services used in setting up a factory qualify as 'input services.' The decision highlights the importance of the nexus between services availed and the manufacturing activity, ultimately affirming the entitlement of the respondent to claim Cenvat credit for the commercial/industrial construction services utilized in establishing their factory.