2017 (11) TMI 29 - AT - Central Excise

CENVAT credit - input services - Construction Services - Department entertained a view that such services are not eligible for credit - Held that - the definition of input services as it stands after 1.4.2011, the same has two parts. The first part includes the words services used in relation to modernization, renovation or repairs of factory . The second part has the exclusion part wherein it states that the service portion in the execution of a works contract and construction services in so far as they are used for construction or execution of works contract of a building or civil structure or a part thereof is excluded. Reliance placed in the case of M/s Sarita Handa Exports (P) Ltd. Versus CCE, Gurgaon-II 2016 (7) TMI 554 - CESTAT CHANDIGARH , where it was held that This service has been used for repair and maintenance of factory premises is specified as an admissible input service under Rule 2(l) of Cenvat Credit Rules, 2004, therefore, the same is allowed. The denial of credit is unjustified - appeal allowed - decided in favor of appellant.

Summary

Issues:
- Eligibility of availed cenvat credit on service tax paid under 'Construction Services' for repair and maintenance of factory premises.

Analysis:
The appellants, manufacturers of two and three wheelers, availed cenvat credit on service tax paid under 'Construction Services' for repair and maintenance of their factory premises. The department contended that such services were not eligible for credit and issued a show cause notice for disallowing the credit, recovering the amount with interest, and imposing penalties. The original authority and Commissioner (Appeals) upheld the demand. The key argument presented was based on the definition of "input services" under Rule 2(l) of the Cenvat Credit Rules. The appellant argued that the services were used for repair and maintenance, falling under the first part of the definition, while the authorities focused on the exclusion part related to works contract services. The appellant cited Tribunal decisions to support their claim, emphasizing that even if work contract services were availed for repairs or maintenance, they should not fall under the exclusion part of the definition.

The Tribunal examined the definition of "input services" post-April 1, 2011, which comprised two parts: one including services for modernization, renovation, or repairs of a factory, and the other excluding services related to works contract and construction services for building or civil structures. The Tribunal referred to previous cases where it was established that services used for repair and maintenance of factory premises were considered admissible input services under the Cenvat Credit Rules. The Tribunal highlighted that the exclusion clause did not apply when services were utilized for activities like fixing doors, which constituted renovation and repair of premises. The Tribunal also noted that denial of credit in such cases was unjustified, leading to the setting aside of the impugned order and allowing the appeals with consequential relief as per the law.

In conclusion, the judgment revolved around the interpretation of the definition of "input services" and the application of the exclusion clause concerning works contract services. The Tribunal's analysis, supported by previous decisions, emphasized that services used for repair and maintenance of factory premises should be considered eligible for cenvat credit, contrary to the department's view. The decision ultimately favored the appellants, highlighting the importance of a thorough understanding and application of legal definitions in tax credit matters.