2017 (6) TMI 506 - AT - Central Excise

CENVAT credit - scope of inputs - cement and structural steel items such as angles, channels, TMT bars, etc - turnkey contract - Held that - Rule 2(k) (ii) is relevant for any service provider providing any output services. It is also without doubt that Explanation (2) is applicable only to the factory of manufacturer - In the present case the appellant has functioned as service provider to execute the turnkey contract for erection, commission and installation of coke oven battery. Since he did not function as a manufacturer, there is no applicability for Explanation (2) to the appellant even for the period after 07.07.2009. Ld. Commissioner was clearly in error in taking the view that the Explanation (2) Rule 2(k) would be applicable irrespective of the fact where the goods have been used by the manufacturer or the service provider. There is no bar for service provider to avail the full credit on cement and steel structural items used for provision of erection, commissioning and installation services - appeal allowed - decided in favor of appellant.

Summary

Issues:
Admissibility of Cenvat Credit on cement and steel structural items for a service provider engaged in erection, commissioning, and installation services.

Analysis:
The appellant, engaged in providing erection, commissioning, and installation services, entered into a turnkey contract with a steel plant. The Department contended that the Cenvat Credit availed on cement and steel items was irregular as these items were excluded from the definition of "input." The appellant challenged this view, citing amendments to the Cenvat Credit Rules and relevant notifications. The appellant argued that they were entitled to the credit as they did not avail abatements and referenced a CBEC circular supporting their claim. The Department maintained that the items were used for construction rather than service provision.

The Tribunal analyzed the contract terms and commercial invoices, noting that the appellant paid full service tax without availing abatements, indicating the use of cement and steel in civil work. The dispute covered the period from October 2008 to March 2011. The Tribunal referred to the definition of "input" under Rule 2(k) of the Cenvat Credit Rules, distinguishing between inputs for manufacturers and service providers. The Tribunal highlighted that the Explanation (2) restricting credit on certain items applied only to manufacturers, not service providers. Citing a previous decision, the Tribunal emphasized that the Explanation did not apply to service providers, leading to the allowance of Cenvat Credit on cement and steel items for the appellant.

In conclusion, the Tribunal ruled in favor of the appellant, setting aside the impugned order and allowing the appeal. The judgment clarified that service providers like the appellant could avail full credit on cement and steel items used for erection, commissioning, and installation services.