2015 (10) TMI 1577 - AT - Service Tax

Denial of CENVAT Credit - Construction service - Held that - manufacturer of goods is entitled to avail Cenvat credit on the services received for setting up of a factory. It is not disputed that construction service has been received by the respondent for setting of their factory. Therefore, the Board s Circular cannot be relied upon. In these circumstances, I hold that learned Commissioner (Appeals) has rightly allowed the Cenvat credit to the appellant for construction services which was used by the respondent for setting up of their factory. - Decided against Revenue.

Summary

Issues:
Appeal against allowing input service credit on construction service for setting up a factory.

Analysis:
The judgment revolves around the appeal by the Revenue against the decision of the learned Commissioner (Appeals) allowing input service credit on construction service availed by the respondent for setting up their factory. The Revenue relied on a CBEC circular to argue that since the construction service resulted in immovable property, Cenvat credit should not be allowed. However, the Tribunal examined the definition of input service under Rule 2(l) of the Cenvat Credit Rules, 2004. The definition includes services used in relation to setting up a factory, among other activities. The Tribunal noted that the construction service was indeed used by the respondent for setting up their factory, making them entitled to avail Cenvat credit on such services.

The Tribunal emphasized that the manufacturer of goods is entitled to avail Cenvat credit on services received for setting up a factory. Since it was established that the construction service was utilized for the purpose of setting up the factory, the Tribunal concluded that the Board's Circular cited by the Revenue could not be relied upon to deny the Cenvat credit. Consequently, the Tribunal upheld the decision of the learned Commissioner (Appeals) in allowing the Cenvat credit for construction services used in setting up the factory. As a result, the appeal filed by the Revenue was deemed to lack merit and was dismissed by the Tribunal.

In conclusion, the judgment clarifies the eligibility of manufacturers to claim Cenvat credit on services used for setting up a factory, as per the defined scope of input services under the Cenvat Credit Rules. The Tribunal's analysis underscores the importance of aligning the interpretation of relevant provisions with the specific circumstances of the case, ensuring that legitimate credit entitlements are upheld based on the actual utilization of services in the manufacturing process.