2018 (1) TMI 821 - AT - Central Excise

CENVAT credit - input services - professional services as regard charges for expansion of production capacity - Held that - the services which are used in modernization, renovation, repairs of the factory Service Tax credit can be availed - It is not clear from the records as to how both the authorities have come to a conclusion that the said expansion/renovation is not covered under the definition of the input service and especially under modernization/ renovation or repair of the factory. It can not disputed that the services rendered by the service provider in the factory premises of the appellant and the services hired were used for the reasons mentioned for - credit allowed - appeal allowed - decided in favor of appellant.

Summary

Issues: Eligibility of Cenvat Credit for Service Tax paid by service providers for expansion of production capacity.

Analysis:
The judgment by the Appellate Tribunal CESTAT AHMEDABAD involved the issue of eligibility of Cenvat Credit for Service Tax paid by service providers for the expansion of production capacity. The appeal was directed against an order passed by the Commissioner of Central Excise, Customs, and Service Tax. Despite the absence of the appellant, the Tribunal proceeded with the disposal of the appeal due to the narrow scope of the matter. The Revenue argued that the services in question were not eligible for Cenvat Credit as the definition of Input Service had undergone changes, excluding Service Tax paid for setting up a plant. The Revenue contended that there was no provision for availing Cenvat Credit for services related to the expansion of a plant. However, the Tribunal noted that the services were utilized for the expansion of the plant, which falls under the definition of Input Service as per the Cenvat Credit Rules.

The Tribunal carefully considered the submissions made by the Revenue and reviewed the records. It was observed that the issue revolved around the eligibility of Cenvat Credit for Service Tax paid by service providers for the expansion of production capacity. The appellant claimed that the services were for the expansion/renovation work at their plant. The Adjudicating Authority and the First Appellate Authority had previously denied the claim, stating that the services were not for the upcoming Galvanized Plant expansion. However, the Tribunal emphasized the need to interpret the definition of input services under Rule 2(l) of the Cenvat Credit Rules, 2004.

According to the definition provided, services used in modernization, renovation, or repairs of a factory are eligible for Service Tax credit. The Tribunal found that the lower authorities erred in rejecting the appellant's claim for Cenvat Credit eligibility. It was noted that the services rendered by the service provider at the factory premises were indeed used for the mentioned reasons. Consequently, the Tribunal held that the impugned order was unsustainable and set it aside, allowing the appeal in favor of the appellant. The judgment highlighted the importance of correctly interpreting the provisions of the Cenvat Credit Rules to determine the eligibility of Cenvat Credit for specific services related to the expansion of production capacity.