2017 (2) TMI 1408 - AT - Service Tax

CENVAT Credit - input services - commercial construction or industrial construction services received by the appellant for setting up a new manufacturing plant adjacent to the existing plant within the same factory premises - denial of credit for the reason that the services are received in regard to immovable property - Board Circular No. 98/1/2008-S.T., dated 4-1-2008 - Held that - Undisputedly the amendment brought forth from 1-4-2011 does not have a retrospective application. The definition of input services as it stood prior to 1-4-2011 included the words setting up of factory . Therefore the appellants are eligible for credit and the adjudicating authority has rightly dropped the proceedings - credit allowed - appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Eligibility of Cenvat credit for service tax paid on construction services for setting up a new manufacturing plant.
2. Interpretation of the definition of input services pre and post the amendment effective from 1-4-2011.

Analysis:
1. The appeal was filed against the Commissioner (Appeals)'s order modifying the adjudicating authority's decision to drop the demand, interest, and penalties proposed regarding the eligibility of Cenvat credit for service tax paid on construction services. The appellants availed credit for services received for setting up a new manufacturing plant adjacent to the existing plant within the same factory premises. The department contended that construction activities on immovable property do not qualify as input services, relying on a Board Circular. The Commissioner (Appeals) upheld the department's appeal, disallowing the credit. The Tribunal was approached against this decision.

2. The appellant argued that the services were availed before 1-4-2011 when the definition of input services explicitly included 'setting up of factory.' The appellant received construction activities services for a new manufacturing plant before the said date. The Tribunal noted that the amendment effective from 1-4-2011 did not have a retrospective application. The definition of input services prior to the amendment included 'setting up of factory,' making the appellants eligible for credit. Consequently, the impugned order disallowing the credit was set aside, and the appeal was allowed with any consequential reliefs.

This judgment clarifies the eligibility of Cenvat credit for service tax paid on construction services for setting up a new manufacturing plant and interprets the definition of input services concerning the retrospective application of relevant amendments. The Tribunal's decision provides clarity on the applicability of the definition of input services pre and post the specified amendment date, ensuring correct interpretation and application of tax credit regulations in similar cases.