2018 (2) TMI 993 - AT - Central Excise

100% EOU - refund of unutilized CENVAT credit - input service - telecom service - maintenance and repair service - Held that - The work undertaken by the two providers are not seen to be construction of actual structure but appear to be in the nature of repair. While addition, alteration, replacement or remodeling of existing structures do find specific mention in section 66E(b) of Finance Act, 1994, repair does not - refund allowed - appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Denial of refund of unutilized credit for 'telecom service' and 'maintenance and repair service'.
2. Eligibility of credit for availing CENVAT credit.
3. Interpretation of rule 2(l) of CENVAT Credit Rules, 2004.
4. Exclusion of services under clause (b) of section 66E of Finance Act, 1994.
5. Determination of construction versus repair services for credit entitlement.

Analysis:
The appeal in question challenged the denial of a refund of unutilized credit amounting to &8377; 56,436 by the Commissioner of Central Excise (Appeals), Mumbai Zone - II, despite sanctioning a larger sum under rule 5 of CENVAT Credit Rules, 2004. The appellant, a 100% export-oriented unit, was denied the refund related to the procurement of 'telecom service' and 'maintenance and repair service' from specific providers.

The main contention revolved around the eligibility of the credit for availing CENVAT credit. The lower authorities held that the credit for 'teleservices' was availed against invoices issued to individual employees, which were not considered as inputs in the manufacturing activity of the appellant. The denial of &8377; 55,421 post-July 2012 was a crucial point, as taxable services under section 65(105) of the Finance Act, 1994 had ceased to exist.

The interpretation of rule 2(l) of CENVAT Credit Rules, 2004 was pivotal in determining the entitlement to CENVAT credit and subsequent refund of unutilized credit. The exclusion of services under clause (b) of section 66E of the Finance Act, 1994 was also a significant factor. The judgment highlighted that the services provided by the two entities were more in the nature of repair rather than construction, which impacted the credit entitlement decision.

The ruling emphasized that while addition, alteration, replacement, or remodeling of existing structures were explicitly mentioned in section 66E(b) of the Finance Act, 1994, repair services were not included. Consequently, the denial of credit by the first appellate authority was deemed unwarranted. As a result, the appeal was allowed, granting the appellant a refund of &8377; 55,421.