2013 (7) TMI 752 - AT - Central Excise

Input service - Credit on service tax paid - Construction of coal shed for manufacturing sponge iron - Department held that coal shed has nothing to do with manufacture of sponge iron - Held that - coal shed is where coal is stored and are covered by services of input service under Rule 2-1(ii) - When the definition specifically includes services relating to setting up of factory, credit on such services cannot be denied prima facie based on the argument that factory is an immovable property - Following decision of Coca Cola India Pvt. Ltd. Vs. CCE, Pune-III 2009 (8) TMI 50 - BOMBAY HIGH COURT and Commissioner of Central Excise, Pune vs. Raymond Zambaiti Pvt. Ltd. 2010 (3) TMI 402 - CESTAT, MUMBAI - Decided in favour of Assessee. Limitation period - Held that - The credit availed is reflected in the appellant s records maintained by them in the ordinary course of their business and was availed on the basis of bonafide belief Revenue has not adduced any evidence to show that such availment of credit by the appellant was with any malafide intention so as to justify invoking longer period of limitation - Decided in favour of Assessee.

Summary

Issues:
1. Availment of credit on service tax paid on construction services for constructing a coal shed.
2. Interpretation of the definition of input service under Rule 2-1(ii).
3. Nexus between the construction of a coal shed and the manufacture of the final product.
4. Applicability of Cenvat Credit Rules, 2004.
5. Bar of limitation for raising a demand.

Analysis:

1. The Applicant availed credit on service tax paid for constructing a coal shed in their factory for manufacturing sponge iron. The contention was that the impugned service is used for creating an immovable property, and credit should be denied based on the decision in a specific case. However, the Tribunal found that the coal shed is essential for storing coal, which is covered under the definition of input service. The Tribunal distinguished between the definitions of inputs and input service under the Cenvat Credit Rules, 2004, emphasizing that services related to setting up a factory are explicitly included. Therefore, the credit on such services cannot be denied merely on the grounds that the factory is an immovable property.

2. The Tribunal referred to various court decisions, including those of the Hon'ble High Court of Mumbai and the Bombay High Court, to establish that the definition of input service is broad and encompasses services used not only directly or indirectly in manufacturing but also those utilized thereafter. By applying the ratio of previous decisions, the Tribunal held that the construction of a coal shed in the factory premises is necessary for manufacturing the final product, making it eligible for Cenvat credit as an input service. This decision was crucial in favor of the appellant.

3. Additionally, the Tribunal found that the demand raised was barred by limitation as it was based on a show cause notice issued after a significant period. The credit availed by the appellant was reflected in their records and was done in good faith without any malafide intention. Since the Revenue failed to provide evidence of malafide intent, the Tribunal held that the demand was time-barred. Consequently, the impugned order was set aside, and the appeal was allowed both on merits and limitation grounds.