2018 (12) TMI 1476 - AT - Central Excise

CENVAT Credit - input services - Engineering Designs and Drawings for civil and structural works in respect of Special Alumina Expansion Project services - Held that - In view of the Purchase Order and the various invoices issued by DCPL (Development Consultants Private Limited, Kolkata), it is found that the service provided by them are not construction service and are not covered under exclusion clause of Rule 2(l) of the Cenvat Credit Rules which only excluded specific services relating to construction service or works contract service when used in or in relation to construction of a building or a civil structure or a part thereof. The services rendered by DCPL is only relating to Drawing or Design and Consulting Engineer s Services whereas the construction services have been rendered by some other person and the DCPL are not concerned with the construction activity at all - further, the definition of input service is very wide and includes inputs used in or in relation to the manufacturing activity. Credit cannot be denied - appeal allowed - decided in favor of appellant.

Summary

Issues:
- Appeal against disallowance of cenvat credit on input services for Special Alumina Expansion Project.
- Interpretation of Rule 2(l) of Cenvat Credit Rules, 2004.
- Applicability of exclusion clause to services related to construction.
- Whether services like Engineering Designs and Drawings are covered under 'input service' definition.
- Comparison with previous judgments allowing credit on related services.

Analysis:

The appeal was filed against the disallowance of cenvat credit on input services for a Special Alumina Expansion Project. The appellant, engaged in manufacturing Inorganic Chemicals, availed cenvat credit on Engineering Designs and Drawings for civil and structural works. The Departmental Officers issued a show-cause notice proposing recovery of Service Tax credit along with interest and penalty. The Assistant Commissioner disallowed the credit and imposed penalties, which was upheld by the Commissioner (Appeals), leading to the present appeal.

The appellant argued that the impugned order failed to appreciate the facts and law properly. They contended that services related to construction should be strictly construed under Rule 2(l) of Cenvat Credit Rules. The appellant relied on previous decisions where credit was allowed on similar related services. They also argued that the expansion project should be considered renovation, falling under the inclusion clause.

On the other hand, the respondent reiterated that the impugned services were related to construction, thus excluded from the definition of 'input service' under Rule 2(l) of Cenvat Credit Rules. The respondent emphasized the exclusion clause's applicability to services related to construction.

Upon reviewing the submissions and material, the Tribunal analyzed the definition of 'input service' under Rule 2(l) of Cenvat Credit Rules. It was noted that the services provided were not construction services but related to Drawing and Design, not covered under the exclusion clause. The Tribunal found that the services were not concerned with actual construction activities but provided Design and Drawing services. Citing a previous judgment, the Tribunal concluded that services like Erection, Commissioning, and Consulting Engineer Services were not excluded from the definition of 'input service'. Consequently, the impugned order was set aside, allowing the appeal of the appellant.

In conclusion, the Tribunal's decision focused on the strict interpretation of the exclusion clause under Rule 2(l) of Cenvat Credit Rules, ultimately allowing the cenvat credit on the input services for the Special Alumina Expansion Project.