2017 (3) TMI 300 - AT - Central Excise

CENVAT credit - service tax paid on Civil Construction Work - denial on the ground that the use of input services had no nexus with the manufacture of final product - Held that - the issue is no longer res integra - reliance placed in the case of Commissioner Central Excise Commissionerate, Delhi-III Versus M/s Bellsonica Auto Components India P. Ltd. 2015 (7) TMI 930 - PUNJAB & HARYANA HIGH COURT , where it was held that input services used in relation to setting up, modernization, renovation or repairs of a factory will be allowed as credit, even if they are assumed as not an activity relating to business as long as they are associated directly or indirectly in relation to manufacture of final products and transportation of final products upto the place of removal - appeal allowed - decided in favor of appellant.

Summary

Issues:
Admissibility of input service credit for civil construction work for the purpose of factory building construction.

Analysis:
The appeal involved a dispute regarding the admissibility of cenvat credit for service tax paid on Civil Construction Work during 2008-09 for the construction of a factory building. The Commissioner (Appeals) had rejected the claim of the appellants citing a lack of nexus between the input services and the manufacture of the final product.

The appellant's advocate argued that post the 2011 amendment in Cenvat Credit Rules, input services for civil construction purposes were expressly excluded from the definition of input service. However, for the period before 1.4.2011, the issue was addressed in the judgment of the Hon’ble Punjab & Haryana High Court in the case of CCE, Delhi-III vs. Bellsonica Auto Components India Pvt. Ltd. The advocate also relied on a Tribunal judgment in the case of Honda Motorcycle & Scooter (I) Pvt. Ltd. vs. CCE, Delhi-III.

The Revenue's representative conceded that the issue was settled by the judgments cited by the appellant for the period before 1.4.2011. Upon hearing the arguments and examining the records, it was acknowledged that the issue of input service credit for Civil Construction Work for factory building construction was no longer res integra. The judgment of Bellsonica Auto Components India Pvt. Ltd. highlighted the necessity of the factory for manufacturing the final product, establishing a clear link between the construction work and the manufacturing process.

The Tribunal followed the precedent set by the Bellsonica case and the judgment in the Honda Motorcycle & Scooter case, along with several other decisions, confirming the eligibility of input service credit for civil construction work related to factory building construction. Consequently, the Commissioner (Appeals)'s order was set aside, and the appeal by the appellants was allowed.

In conclusion, the judgment clarified the admissibility of input service credit for civil construction work concerning factory building construction, emphasizing the direct or indirect necessity of the construction for the manufacturing process. The legal position established by previous judgments and the specific exclusion of construction services from the definition of input service post the 2011 amendment were crucial in determining the outcome of the appeal.