2019 (1) TMI 1171 - AT - Service Tax

CENVAT Credit - input - Cement, M.S. Plates, M.S. Channels etc. used for construction of factory shed, building or laying of foundation or making of structures for the support of capital goods - Held that - The plain reading of the amended explanation in the definition of Input, makes it clear that the opening line for Explanation 2 is about the input including goods as are used in the manufacture of the capital goods used in the factory of the manufacturer. It becomes clear that the explanation is exclusively in respect of the manufacture only, that too when it is used for construction of factory shed, building or laying of foundation or making of structure etc. The use of word factory shed further clarifies that the explanation is exclusively for the manufacturer and not for the service provider. Thus, by taking inference from the above said explanation, credit in respect of inputs, which is undisputedly used for providing output service namely errection, commission, installation, the credit cannot be denied to the service provider i.e. the appellant. The findings of Commissioner (Appeals) in para 7 thereof do not help the Revenue as the exclusion made under the explanation to definition of input service does not extend to the service provider - appeal allowed - decided in favor of appellant.

Summary

Issues:
- Availment of Central Excise Duty credit on construction materials
- Applicability of Notification No. 16/2009 on definition of input
- Time limitation for show cause notice

Analysis:
1. Availment of Central Excise Duty credit on construction materials:
The appellant, engaged in construction services, availed credit of Central Excise Duty on items like Cement, M.S. Plates, M.S. Channels for construction activities. The Department alleged wrongful availment and issued a show cause notice proposing disallowance of credit. The Order-in-Original confirmed disallowance, leading to an appeal before the Commissioner (Appeals) and subsequently to the Tribunal.

2. Applicability of Notification No. 16/2009 on definition of input:
The appellant argued that Notification No. 16/2009 amended the definition of input, contending it applies only to manufacturers, not service providers. Citing case laws like M/s. Ultratech Transmission and S.B. Jivani, the appellant claimed entitlement to credit due to payment of tax without abatement under the Composition Scheme. The Department, however, justified the order, emphasizing the Commissioner's reasoning against the appellant's stance.

3. Time limitation for show cause notice:
The appellant objected to the show cause notice as time-barred, asserting a bona fide belief regarding the non-applicability of Explanation 2 in the definition of input. They argued against the invocation of an extended period due to lack of suppression of facts. The Tribunal analyzed the definition of input pre and post April 2011 amendments, emphasizing the exclusions for construction materials used by manufacturers, not service providers.

In the judgment, the Tribunal highlighted that the amended explanation in the definition of input pertains exclusively to manufacturers and not service providers. Relying on the Ultratech Transmission case, the Tribunal concluded that the denial of credit to the appellant for inputs used in providing output services was unjustified. The Tribunal set aside the Commissioner (Appeals) order, finding discrepancies in the observations made and allowed the appeal.