2017 (9) TMI 274 - AT - Central Excise

CENVAT credit - input service - services used in the guest house as well as rehabilitation colony - Held that - the guest house as well as rehabilitation colony are outside the factory premises and have been constructed only as a welfare measure and these have no nexus with the manufacture, storage or sale of the finished products - credit rightly denied. CENVAT credit - goods used in erection of 132KV transmission line to bring electricity to the appellant s project site - Held that - the benefit of cenvat credit on goods used in the construction of transmission line to bring electricity to the factory has been allowed by the Tribunal in the case of Prism Cement Vs. CCE 2017 (3) TMI 1283 - CESTAT NEW DELHI - credit allowed. CENVAT credit - GTA service in respect of goods consigned on FOR basis upto the customer s premises - Held that - the same issue was before the Hon ble High Court of Punjab & Haryana in the case of Ambuja Cements 2009 (2) TMI 50 - PUNJAB & HARYANA HIGH COURT in which the Hon ble High Court, after considering the definition of input service in detail, allowed the benefit of such cenvat credit upto the customer s premises - credit on outward freight allowed. CENVAT credit - excise duty paid on M.S. pipe, galvanised fabric, tower parts, welding electrodes etc. which were used for maintenance of capital goods - Held that - parts of capital goods are also entitled to the benefit of cenvat credit - Tribunal has also been consistently allowing the cenvat credit on items such as angles, section etc. which are used in the construction of support structure for capital goods also. The M.S. pipes are used in construction of water supply pipe lines which are essential in the factory for manufacture of goods and as such will be entitled to cenvat credit - credit allowed. Appeal allowed - decided partly in favor of appellant.

Summary

Issues:
1. Disallowance of Cenvat credit on input services for guest house and rehabilitation colony.
2. Disallowance of Cenvat credit on goods used for setting up transmission line.
3. Disallowance of Cenvat credit on service tax paid on freight.
4. Disallowance of Cenvat credit on items used for maintenance of capital goods.

Analysis:

1. The dispute involved the disallowance of Cenvat credit on input services for the guest house and rehabilitation colony. The appellant argued that these services were used for welfare purposes and should qualify as input services under Rule 2(l). However, the Tribunal found that since these facilities were outside the factory premises and not directly connected to the manufacturing process, the denial of Cenvat credit was justified.

2. The disallowance of Cenvat credit on goods used to set up a transmission line for procuring electricity was also contested. The appellant claimed that the transmission line was essential for factory operations. The Tribunal referred to a previous case where Cenvat credit for similar goods was allowed, leading to the decision to set aside the impugned order and allow the Cenvat credit for goods used in setting up the transmission line.

3. Another issue was the denial of Cenvat credit on service tax paid on freight up to the customer's premises. The Tribunal referred to a previous High Court decision that allowed such Cenvat credit up to the customer's premises. Following this precedent, the Tribunal allowed the Cenvat credit on outward freight.

4. The disallowance of Cenvat credit on items like M.S. pipes and welding electrodes used for maintenance of capital goods was also challenged. The adjudicating authority considered these goods as not falling under the definition of capital goods. However, the Tribunal noted that parts of capital goods are entitled to Cenvat credit and cited previous cases where similar items were allowed Cenvat credit. Consequently, the Tribunal allowed the Cenvat credit on items used for maintenance of capital goods.

In conclusion, the Tribunal upheld the disallowance of Cenvat credit for the guest house and rehabilitation colony but set aside the impugned order for other demands, partially allowing the appeal.