2013 (4) TMI 408 - AT - Central Excise

Cenvat credit for the services obtained at site where undertaking installation works disallowed - Held that - It is evident from the Order in Appeal that with respect of certain service tax credit appellants have been allowed to take credit as per the findings. With respect to remaining entries appellant could not establish that the contracts include commissioning and installation charges in the contracted value. It is also observed from one contract dated 23/06/2006 entered by the appellant with AKUMS Drugs & Pharmaceuticals Ltd. that freight and transit insurance are required to be paid extra. In view of such contracts entered into by the appellants with their service providers it cannot be said that in all the situations installation and erection transit insurance freight have been included as a complete package for considering the contracts to be turn-key project. All these details are required to be gone into to establish that the contracts are only on turn-key basis in order to hold that the goods are sold as turn-key project and that sale is extended to the installation site. If all the elements of cost of installation and erection transit insurance freight etc. are included in the contracted value then as per Circular No.97/8/2007-ST dated 23/08/2007 issued by CBEC the point of sale will be the installation site and service tax credit will be admissible to the appellant for the services obtained from other service providers at the installation site. Thus the order passed by the Commissioner (A) under OIA set aside and the matter is remanded to the original adjudicating authority for deciding the issue afresh after giving a personal hearing to the appellant. The appeal is allowed by way of remand.

Summary

Issues: Disallowance of cenvat credit for services obtained at the installation site. Interpretation of Rule 2(d) of the cenvat credit rules. Application of CBEC Circular No.97/23/2007-ST. Verification of contracts for inclusion of installation charges. Remand to original adjudicating authority.

Analysis:
1. The appeal was filed against the Order in Appeal disallowing cenvat credit for services obtained at the installation site. The appellant undertakes complete installation of pharmaceutical plants and machinery, including services from other providers at the site. The dispute revolves around the admissibility of cenvat credit for these services.

2. The appellant argued that services obtained outside the factory premises are covered under input services as per Rule 2(d) of the cenvat credit rules. They presented invoices and contracts showing that installation and commissioning charges are integral to the works contract, shifting the place of removal to the installation site as per CBEC Circular No.97/23/2007-ST. However, the Commissioner (A) only allowed a partial credit, leading to the appeal.

3. The respondent contended that full contract details were not provided to the Commissioner (A), and only specific instances demonstrated inclusion of installation charges in the machinery value. The argument centered on whether the contracts truly constituted turnkey projects with all installation costs included.

4. The crucial issue was determining the admissibility of service tax credit for services obtained at the site. While some credits were allowed based on specific findings, others lacked evidence of including installation charges in the contracted value. The need for detailed verification of contracts to establish turnkey nature, as per CBEC Circular, was emphasized. Therefore, the matter was remanded to the original adjudicating authority for thorough verification based on the Circular's criteria.

5. Consequently, the Order in Appeal disallowing cenvat credit was set aside, and the case remanded for a fresh decision after providing the appellant with a personal hearing. The appeal was allowed for further examination of the admissibility of cenvat credit based on the contractual details provided to the adjudicating authority.