2015 (10) TMI 1316 - AT - Central Excise

Denial of input service credit - civil construction services - Held that - On going through the above provisions it is clearly mentioned in the inclusive part of the definition under Rule 2(1) of CCR 2004 that for for setting up modernization renovation or repair of the factory Cenvat credit is entitled for input service. The said part of the definition has been ignored by the adjudicating authority as well as by the Committee of Commissioners while filing the appeal before this Tribunal. As appellant has taken the Cenvat credit on civil construction services for construction of factory shed which is not other than setting up of factory premises. Therefore I hold that respondent is entitled to take Cenvat Credit on the side services. - No infirmity in the impugned order. - Decided in favour of assessee.

Summary

Issues:
- Interpretation of the definition of "input service" under Rule 2(1) of CCR, 2004.
- Eligibility of input service credit on civil construction services for the construction of a factory shed.
- Nexus between civil construction services and manufacturing activity for claiming Cenvat credit.

Analysis:
The appeal before the Appellate Tribunal CESTAT NEW DELHI involved a dispute regarding the eligibility of input service credit on civil construction services for the construction of a factory shed. The Revenue challenged the order of the learned Commissioner (Appeals) who allowed the input service credit after examining the definition of "input service" under Rule 2(1) of CCR, 2004. The respondents, manufacturers of motor vehicle parts, had availed Cenvat credit on service tax paid for civil construction services related to the construction of a factory shed in their factory premises. The Revenue contended that civil construction services did not have a nexus with the manufacturing activity of the respondents.

The key contention revolved around the interpretation of the definition of "input service" as per Rule 2(1) of CCR, 2004. The inclusive part of the definition explicitly included services used for setting up, modernization, renovation, or repair of a factory as eligible for Cenvat credit. The adjudicating authority and the Committee of Commissioners had overlooked this aspect while challenging the Cenvat credit taken by the respondents on civil construction services for the construction of the factory shed. The Appellate Tribunal observed that the construction of a factory shed falls under the category of setting up the factory premises, making it eligible for Cenvat credit as per the definition of "input service."

Ultimately, the Appellate Tribunal upheld the order of the learned Commissioner (Appeals) and dismissed the appeal filed by the Revenue. The Tribunal concluded that the respondents were entitled to take Cenvat credit on the civil construction services for the construction of the factory shed, as it aligned with the provisions of the definition of "input service" under Rule 2(1) of CCR, 2004. The judgment emphasized the importance of considering all aspects of the definition and ensuring that the nexus between the services availed and the manufacturing activity is duly established for claiming Cenvat credit.