2019 (4) TMI 10 - AT - Central Excise

CENVAT Credit - input services - construction of guest house, canteen, logistic building, painting of chimney, factory building, railway siding outside the factory etc. - period from May 2009 to August 2012 - Held that - All the input services involved in the present case have been held to be input service by various decisions - for the demand of ₹ 7,04,398/- confirmed for the period post 1.4.2011, the provision of service was completed before 1.4.2011 and the invoices for the same was also raised before 1.4.2011 and therefore, the appellant is entitled to claim the CENVAT credit in view of the CBEC Circular dated 29.4.2011 - reliance placed in the case of KAMAL RUB PLAST INDUSTRIES P LTD. VERSUS CCE-DELHI-III 2016 (5) TMI 13 - CESTAT NEW DELHI . Appeal allowed - decided n favor of appellant.

Summary

Issues:
- Eligibility of CENVAT credit on input services used for construction activities pre and post 1.4.2011.
- Nexus establishment between input services and manufacturing activity.
- Applicability of CBEC Circular dated 29.4.2011.
- Interpretation of Rule 2(l) of CENVAT Credit Rules, 2004.

Eligibility of CENVAT Credit on Input Services:
The appellant, engaged in cement manufacturing, availed CENVAT credit on input services for construction activities like guest house, canteen, painting of chimney, etc. The department issued a show-cause notice demanding recovery of credit availed. The Additional Commissioner denied credit, leading to an appeal before the Commissioner (A) who also rejected it. The appellant contended that services completed before 1.4.2011 are eligible for credit, citing judicial precedents and CBEC Circular No.943/04/2011. The appellant argued that all input services were directly related to manufacturing activity, relying on various decisions supporting the eligibility of credit pre and post 1.4.2011.

Nexus Establishment between Input Services and Manufacturing Activity:
The AR argued that certain construction activities were not related to manufacturing but were facilitative, lacking a nexus with finished goods production as required by Rule 2(l) of CENVAT Credit Rules, 2004. However, the appellant provided evidence and legal precedents to establish the integral nature of the construction activities to the manufacturing process, emphasizing the necessity of these services for running the factory.

Applicability of CBEC Circular and Rule Interpretation:
The Tribunal analyzed the facts and legal arguments presented by both parties. Considering the completion of services before 1.4.2011 and the invoices raised prior to this date, the Tribunal found the appellant entitled to claim CENVAT credit. Relying on the CBEC Circular and judicial decisions, the Tribunal concluded that all input services in question were eligible for credit. By following the precedents and interpreting Rule 2(l) of CENVAT Credit Rules, 2004, the Tribunal held that the impugned order was unsustainable in law and allowed the appeal of the appellant.

This detailed analysis of the judgment highlights the key issues of eligibility of CENVAT credit on input services, establishing nexus between services and manufacturing activity, interpretation of relevant rules and circulars, and the final decision of the Tribunal based on legal precedents and factual considerations.