2018 (1) TMI 715 - AT - Central Excise

CENVAT credit - various input services which are used by the appellant during the course of setting up of the factory i.e. before commencement of the commercial production - Held that - A plain reading of the amended provision reveals that the expression setting up and activities relating to business have been deleted from the scope of the meaning of input service. There cannot be any doubt that the case of the appellant would fall under the third limb i.e. services used in relation to setting up modernization, renovation or repairs of factory or office relating to such factory, as it is not the claim of the appellant that the disputed services were used by the appellant-manufacturer directly or indirectly in or in relation to the manufacture of final product or in relation to clearance of final products from the place of removal. Therefore, in the amended definition, once the expression setting up has been deleted from the scope of input service, all services used for modernization, renovation or repairs of a factory or office relating to such factory would continue to be admissible even after specific exclusion that have been provided in the amended definition of input services relating to works contract service/ construction services. Extended period of limitation - Held that - There is no doubt that the issue involved in the present case is a pure question of interpretation of law and the appellant had availed credit only on the aforesaid input services and not on construction services; after disclosing all the facts in their books of accounts - extended period cannot be invoked. Appeal allowed - decided in favor of appellant.

Issues Involved:
1. Eligibility of Cenvat credit on various input services used during the setting up of a factory.
2. Interpretation of the amended definition of "input service" under Rule 2(l) of the Cenvat Credit Rules, 2002.
3. Applicability of the extended period of limitation for issuing the demand notice.

Detailed Analysis:

1. Eligibility of Cenvat Credit on Various Input Services:
The appellant availed Cenvat credit amounting to ?15,99,633/- on input services such as Manpower Services, CHA Services, Erection and Commissioning Services, Gardening Services, Housekeeping Services, and IT Services for SAP implementation, prior to the commencement of commercial production. The Department argued that these services were used in setting up the factory and, under the amended definition of input service effective from 01.04.2011, such credit is inadmissible. The appellant contended that they did not claim service tax on construction-related services and that the services in question are eligible for credit both before and after the amendment.

2. Interpretation of the Amended Definition of "Input Service":
The core dispute revolved around the interpretation of the amended Rule 2(l) of the Cenvat Credit Rules, 2002. The appellant argued that only construction-related services used for setting up the factory were excluded from the definition of input services post-amendment. They cited judicial precedents and a TRU clarification to support their claim that services like manpower supply, SAP implementation, and others should still be eligible for credit. Conversely, the Revenue argued that the term "setting up" was consciously deleted from the definition, indicating that all services related to setting up a factory are ineligible for credit.

3. Applicability of the Extended Period of Limitation:
The Tribunal found merit in the appellant's argument regarding the limitation period. The issue was deemed a pure question of law interpretation, and the appellant had disclosed all relevant facts in their books of accounts and during the audit conducted in January 2014. Therefore, invoking the extended period of limitation was deemed unsustainable.

Judgment:
The Tribunal analyzed the definition of "input service" before and after the amendment. Before 01.04.2011, the definition included services used in setting up, modernization, renovation, or repairs of a factory. After the amendment, the terms "setting up" and "activities relating to business" were deleted. The Tribunal referenced the judgment in Coca Cola (India) Pvt. Ltd. Vs CCE Pune, which categorized the definition into five limbs, stating that satisfying any one limb entitles the assessee to avail Cenvat credit. The Tribunal concluded that the appellant's case fell under the third limb, but since "setting up" was deleted from the definition, services used for setting up the factory were not admissible for credit post-amendment.

However, the Tribunal agreed with the appellant on the issue of limitation, noting that there was no suppression of facts or mis-declaration. The demand notice invoking the extended period of limitation was thus deemed unsustainable.

Conclusion:
The impugned order was set aside on the grounds of limitation, and the appeal was allowed with consequential relief as per law. The Tribunal pronounced the judgment in the open court on 04.01.2018.

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