9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2015 (12) TMI 1060 - AT - Service TaxCENVAT Credit - scope of input services - Rule 2(l) - Credit on inputs, capital goods and input services used in various output services - Held that - input Cement and Steel used in the factory of manufacturer shall not be eligible input credit. This explanation is applicable only to the manufacturer and not the service provider. It is to be read strictly as per plain meaning of the statute. There is no indication in the Explanation that it would apply to the service provider. The Hon ble Gujarat High Court in the appellants own case held that amendment in Explanation-2 in Notification No. 16/2009-CE (NT) (supra) was not clarificatory in nature and the amended definition will not be applicable to the service providers. So, the denial of input credit on Cement and Steel before and after amendment of Explanation 2 of definition Input, cannot be sustained. Jetty is used for loading and unloading of goods. The definition of Port service under Section 65 (82) of the said Act, 1994 covers any service rendered by a port in any manner in relation to a vessel or goods. Thus, jetty is used within the port for loading and unloading of the goods from the vessel. Port cannot function without jetty. So, CENVAT credit on the inputs and capital goods used in the construction of jetty is eligible for output service namely port service. It is noticed from the above decisions that the test of input and capital goods in respect of output service is whether it is used for providing output service. In the present case, it is clearly evident that the inputs and capital goods were used in construction of jetty for rendering port service. There is no reason to deny CENVAT credit on such input and capital goods. Notification No. 25/2007-ST (supra) exempts from payment of service tax on the Commercial or Industrial construction services. It would apply to a Commercial concern in relation to construction of Port or other Port provided service to any person exempted from the whole of service tax leviable thereon. In the present case, the Port was constructed by the contractor appointed by the Appellant for construction of Jetty, the exemption is applicable to the contractor. The contractors are not eligible to avail CENVAT credit. On the other hand, the appellant paid service tax on Port service. Hence, the Appellants are entitled to avail CENVAT credit on the inputs used for taxable output services, Port service. We find that the Hon ble Gujarat High Court in the Appellant s own case, as stated above, held that Appellant is entitled for input credit and it cannot be denied since construction of jetty was exempted. So, the findings of the adjudicating authority on this issue, is not sustainable. Various input services - Nexus with output services - Nexus of these Input Services with output service are covered in the inclusive part of the definition viz. services used in relation to business activities . The nexus of inputs Service used in the business related activities would be established by the narration of the services in their accounts. In any event, all the services were duly recorded in the books of accounts, which were audited under the companies Act and other authorities. Further, the services coming under Professional Services (0.67%) and Construction Services (0.10%) are evidently eligible for CENVAT Credit, as observed herein earlier. Appellants have rendered services within Special Economic Zone (SEZ). In terms of Section Rule 6(6)(i) of the Cenvat Credit Rules, the appellant was not required to reverse the Cenvat Credit used in the Special Economic Zone (SEZ). The appellants would be eligible to avail Cenvat Credit as specified under Rule 6(5) of the Cenvat Credit Rules as the same have been used for providing output Services. Central Excise Officers raised the demand after scrutiny of the records on the above Input Services. The various services as detailed mentioned in reply to the show cause notice are also placed before the Tribunal. The nexus between the Input and Output services is clearly evident from the records except for items namely Air Travel Agency, Airport Service, Mandap Keeper Service, Membership of Clubs, Passenger Embarking for Foreigner and Sponsorship Service which requires to be examined by the Adjudicating authority. So, there is no reason to deny CENVAT Credit on the input services except the items mentioned above. It is a case of eligibility of CENVAT Credit on input, input service and capital goods and most of the items are admissible and therefore, imposition of penalty is not warranted. - Substantially decided in favor of assessee.
Issues Involved:
1. Denial of CENVAT Credit on Inputs (Cement and Steel). 2. Denial of CENVAT Credit on Other Inputs and Capital Goods. 3. Denial of CENVAT Credit on Input Services. Detailed Analysis: 1. Denial of CENVAT Credit on Inputs (Cement and Steel): The Tribunal noted that the adjudicating authority had denied CENVAT credit on cement and steel used in the construction of jetty and port buildings, considering them neither as inputs nor capital goods. However, the Hon'ble Gujarat High Court, in the appellants' own case, had set aside this decision, ruling that the Explanation 2 as amended by Notification No. 16/2009-CE (NT) dated 07.07.2009, which excluded cement and steel from the definition of inputs, was not applicable to service providers but only to manufacturers. The High Court emphasized that the appellants, being service providers, were entitled to CENVAT credit on cement and steel used in constructing jetties and port buildings as these were integral to providing port services. The Tribunal concurred with this view, reiterating that the amendment was not clarificatory and should not apply retrospectively to service providers. 2. Denial of CENVAT Credit on Other Inputs and Capital Goods: The adjudicating authority had also denied CENVAT credit on other inputs and capital goods used for constructing port facilities, citing that these were used for exempted services (construction of port) and not directly for providing port services. However, the Tribunal observed that the definition of capital goods and inputs under Rule 2 of the CENVAT Credit Rules, 2004, was broad enough to include goods used for providing output services. The Tribunal referred to various judicial precedents, including the Andhra Pradesh High Court's decision in CCE, Vishakhapatnam vs. Sai Samhita Storages (P) Limited and the Tribunal's decision in Reliance Infratel Ltd vs. CST, Mumbai-II, which supported the eligibility of CENVAT credit on goods used in providing output services. The Tribunal concluded that since the inputs and capital goods were used for constructing facilities essential for providing port services, the appellants were entitled to CENVAT credit on these items. 3. Denial of CENVAT Credit on Input Services: The adjudicating authority had denied CENVAT credit on input services, arguing that the appellants failed to provide documentary evidence proving the use of these services for providing output taxable services. The Tribunal, however, emphasized the broad scope of the definition of input services under Rule 2(l) of the CENVAT Credit Rules, 2004, which includes any service used by a provider of taxable service for providing an output service. The Tribunal referred to various judicial decisions, including the Hon'ble Supreme Court's observation in State of Punjab vs. British India Corporation Ltd and the Hon'ble Bombay High Court's decision in Coca Cola India Pvt. Ltd vs. CCE, Pune-III, which highlighted the expansive interpretation of input services. The Tribunal found that the appellants had adequately demonstrated the nexus between the input services and the output services, and thus, were entitled to CENVAT credit. However, for certain services like Air Travel Agency, Airport Service, Mandap Keeper Service, Membership of Clubs, Passenger Embarking for Foreign Travel, and Sponsorship Services, the Tribunal remanded the matter to the adjudicating authority for further examination to establish their eligibility as input services. Conclusion: The Tribunal set aside the denial of CENVAT credit on inputs (cement and steel) and other inputs and capital goods, affirming their eligibility for credit as they were used for providing port services. The Tribunal also allowed CENVAT credit on most input services, except for a few specific services which were remanded to the adjudicating authority for further verification. The penalties imposed were also set aside. The appeals were disposed of accordingly.
|
