2010 (7) TMI 302 - AT - Service Tax

CENVAT credit of Service Tax under the provisions of CENVAT Credit Rules, 2004 - respondent availed CENVAT credit of Service Tax on account of services like for construction, erection, installation and other services like maintenance and repairs used in the Fly Ash Plant situated at Thermal Power Plant which is outside of the factory premises - SCN issued and demand was confirmed - DR submitted that in this case the respondent has availed the services at Thermal Power Plant which is outside the factory premises - Held that - Rule 2(l) of the CENVAT Credit Rules, 2004, it is seen that no where it is mentioned that the input service credit is not available for the services utilized outside the factory premises - denial of CENVAT credit on the ground that the services were not received by the respondent in the factory premises, is not sustainable - Appeal is rejected

Summary

Issues:
- Challenge to input service credit allowed by Commissioner (Appeals) to the respondent.
- Interpretation of Rule 2(l) of the CENVAT Credit Rules, 2004 regarding availability of CENVAT credit for services utilized outside the factory premises.

Analysis:

Issue 1: Challenge to input service credit
The case involved a challenge by the Revenue against the impugned order where the Commissioner (Appeals) had allowed input service credit to the respondent, a manufacturer of cement. The respondent had availed CENVAT credit of Service Tax for services related to construction, erection, installation, maintenance, and repairs used in a Fly Ash Plant located outside the factory premises. The Commissioner (Appeals) had relied on a previous court judgment to allow the appeal, which held that MODVAT/CENVAT credit on capital goods would be available if certain conditions were met. The Revenue contended that the facts of the case were different, and the Commissioner (Appeals) had not discussed the issue on merit regarding the respondent's entitlement to CENVAT Credit as per the Rule 2(l) of the CENVAT Credit Rules.

Issue 2: Interpretation of Rule 2(l) of CENVAT Credit Rules
The key point of contention revolved around the interpretation of Rule 2(l) of the CENVAT Credit Rules, 2004, which outlines the conditions for availing CENVAT credit on input services. The rule specifies that the credit is available for services used by a provider of taxable service for providing an output service, or used by the manufacturer directly or indirectly in relation to the manufacture of final products. The rule also includes various services related to business activities. The Revenue had denied CENVAT credit to the respondent on the basis that the services were received outside the factory premises. However, the Tribunal noted that Rule 2(l) did not explicitly exclude the availability of input service credit for services utilized outside the factory premises. The Tribunal concluded that the denial of CENVAT credit solely based on the location of service receipt was not sustainable under the rule. Therefore, the appeal challenging the input service credit was rejected.

In conclusion, the judgment upheld the decision of the Commissioner (Appeals) to allow input service credit to the respondent, emphasizing that the denial of credit based on the location of service receipt was not supported by the provisions of Rule 2(l) of the CENVAT Credit Rules, 2004.