2019 (2) TMI 746 - AT - Central Excise

CENVAT Credit - input services - the works contract for the repair or maintenance used in the factory building and the administrative building alongwith other fabrication work and civil work - Held that - Coming to the inclusion part of the definition the pare perusal clarifies that the services used in relation to the modernisation, renovation, repair, etc. are the eligible input services. These two perusal are creating a clear distinction between what is called as repair and maintenance and what is called as construction and that these two are two separate services altogether. Apparently and admittedly the services provided by the contractor of the appellant to the appellant are the Repair and Maintenance Services though in the form of work contract for civil structure but for the purpose of repair and maintenance. The invoices as placed on record clearly mentions the same. Thus the services rendered is the work contract for the maintenance of already existing structure within the appellant s plant wherein is carried on the manufacturing of the petroleum products (final products) by the appellant. The harmonious reading of the inclusive part of the definition and the exclusion clause mentioned at Clause (a) relating to construction service of the definition of input service , it is clear that the construction service relating to modernisation, renovation and repair of the factory continued to be within the meaning of input service and accordingly, the service tax paid on such service is eligible to credit. Undisputedly, the appellants carried out modernisation, renovation or repair work in their factory premises as is evident from the input service invoices enclosed with the respective appeal paper book; therefore, the same are eligible to credit. The Commissioner(Appeals) has definitely committed an error while just relying upon the fact that the services provided were in the nature of work contract and he has failed to appreciate the work contract is not for construction but only for repair and maintenance. The findings are therefore liable to be set aside. The impugned order denying the cenvat credit on Repair and Maintenance Service on the ground of these being work contracts which are not input services - Appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Admissibility of cenvat credit on services like courier services, retention charges, sponsorship services, erection and commissioning services.
2. Eligibility of cenvat credit for works contract for civil maintenance and repair of roads in refinery.
3. Interpretation of the definition of input services under Rule 2(1)(k) of Cenvat Credit Rules, 2004.

Issue 1: Admissibility of Cenvat Credit on Various Services:
The appellant, engaged in manufacturing petroleum products, availed cenvat credit on various services, including courier services, retention charges, sponsorship services, and erection and commissioning services. The initial observation by the Department raised concerns regarding the admissibility of these credits. The Commissioner(Appeals) partly allowed the appeal by dropping the demand for duty on scrap sale and allowing cenvat credit for the mentioned services. The Tribunal upheld the Commissioner's decision, considering these services as eligible for cenvat credit.

Issue 2: Eligibility of Cenvat Credit for Works Contract for Civil Maintenance and Repair:
The appellant sought cenvat credit for works contract related to civil maintenance and repair of roads in the refinery. The Commissioner(Appeals) disallowed this credit, citing it as not qualifying under the definition of input services. The Tribunal analyzed the nature of the services provided by contractors for maintenance and repair within the manufacturing plant. It concluded that these services fell under repair and maintenance, distinct from construction services, making them eligible for cenvat credit. The Tribunal referred to legal precedents to support its decision.

Issue 3: Interpretation of the Definition of Input Services:
The Tribunal examined the definition of input services under Rule 2(1)(k) of Cenvat Credit Rules, 2004. The definition includes services used in modernization, renovation, repair, and other activities related to manufacturing. The exclusion clause mentions works contract and construction services, emphasizing services for construction of buildings or civil structures. The Tribunal differentiated between repair and maintenance services and construction services, highlighting that repair and maintenance services are eligible for cenvat credit. It referenced legal decisions and a Board circular to support the interpretation of the inclusive part of the definition.

In conclusion, the Tribunal set aside the order denying cenvat credit for repair and maintenance services under works contracts, emphasizing that such services qualify as input services. The Tribunal allowed the appeal and granted consequential relief as per the law.