2017 (9) TMI 74 - AT - Central Excise

CENVAT credit - input service - construction services - case of Revenue is that major part of appellant s claim of Cenvat credit pertains to supply of readymix concrete, which is an activity in the domain of manufacturing and the activity being under the category of manufacturing the same cannot be an input service for claiming Cenvat credit - Held that - as per the relevant law the appellant is entitled to Cenvat credit on the construction services , during the relevant period prior to 31.3.2011 (2008-2009 to 2010-2011), as the amendment excluding the construction services from the definition of input service under Rule 2(l) of CCR, 2004 came into with effect from 1.7.2012 only vide N/N. 28/2012-CE(NT) dated 20.6.2012. Scope of SCN - Cenvat credit in case of supply of readymix concrete - Held that - This reasoning given by the impugned order has not been part of the Show Cause Notice issued to the appellant. If it is so, the denial of Cenvat credit on this reasoning is set aside - The Hon ble Supreme Court s decision in the case of CCE Vs. Ballarpur Industries Ltd. 2007 (8) TMI 10 - SUPREME COURT OF INDIA has held that the Show Cause Notice is the foundation in the matter of levy and recovery of duty, penalty and interest; if there is no invocation of any rule in the Show Cause Notice it would not be open to the adjudicating authority to invoke the same - the appellant is entitled to Cenvat credit in case of supply of services relating to readymix concrete, which would be covered by construction service . The appellant is entitled to Cenvat credit for the services which are covered by construction service except in the case of the invoice(s) pertaining to construction activity near Railway station, where credit of ₹ 4,496/- is involved and for which the appellant during hearing has withdrawn their claim of Cenvat credit. Appeal allowed - decided partly in favor of appellant.

Summary

Issues:
- Denial of Cenvat credit on construction services
- Denial of Cenvat credit on supply of readymix concrete
- Contesting Cenvat credit on construction done outside factory premises
- Late issuance of Show Cause Notice for certain Cenvat credit claims

Analysis:

Issue 1: Denial of Cenvat credit on construction services
The appellant contested the denial of Cenvat credit amounting to ?32,46,407 based on the argument that the Show Cause Notice mentioned a different ground for denial. The Revenue argued that the major part of the claimed Cenvat credit pertained to the supply of readymix concrete, which they considered a manufacturing activity not eligible for Cenvat credit. However, the Tribunal found that the appellant was entitled to Cenvat credit on construction services during the relevant period before 31.3.2011. The Tribunal referred to an amendment excluding construction services from the definition of input service, which came into effect from 1.7.2012 only, and ruled in favor of the appellant.

Issue 2: Denial of Cenvat credit on supply of readymix concrete
The Cenvat credit on the supply of readymix concrete amounting to ?27,76,663 was denied by the Revenue, citing it as a manufacturing activity not eligible for credit. The Tribunal noted that this reasoning was not part of the Show Cause Notice, referencing the principle that the Show Cause Notice forms the foundation for levy and recovery of duty. Citing Supreme Court decisions, the Tribunal set aside the denial of Cenvat credit on this ground and ruled that the appellant was entitled to the credit for services related to readymix concrete, which fell under construction services.

Issue 3: Contesting Cenvat credit on construction done outside factory premises
The Department contested a part of the Cenvat credit amounting to ?1,95,445, claiming that construction activities were done outside the factory premises. The appellant argued that all activities were within their factory premises, which covered a significant area. The Tribunal considered the submissions and found that the appellant was entitled to Cenvat credit for services covered under construction services, except for activities near the Railway station, for which the appellant withdrew their claim of ?4,496 credit during the hearing.

Issue 4: Late issuance of Show Cause Notice for certain Cenvat credit claims
The Revenue argued that certain Cenvat credit claims were beyond the normal one-year period due to invoices not being mentioned in statutory returns. The Tribunal considered the arguments but ultimately ruled in favor of the appellant based on the entitlement to Cenvat credit on construction services during the relevant period. The impugned order was modified accordingly, and the appeal was partly allowed as per the Tribunal's findings.