2019 (6) TMI 1193 - AT - Service Tax

CENVAT Credit - input services - service tax paid on Commercial or Industrial Construction Services by the sub-contractors - denial of credit on the ground that with the amendment of the definition of Input Service with effect from 01/04/2011, the Commercial or Industrial Construction Services stand excluded - extended period of limitation - HELD THAT - The input services stand defined with inclusion clause as also exclusion clause. Admittedly the appellant is covered by the main blanket definition of input service in so far as he is utilizing the services of the sub-contractor for providing output services. Revenue‟s reliance is on the exclusion clause. As per the said exclusion clause, certain services stand specified in clause (A) of the said exclusion, which would not be available for availing Cenvat credit, if the same are used for certain specified output services. However, the said exclusion clause does not stop there. There is further exception to the effect that such exclusion would not apply if the specified services are used for providing one or more of the specified services - This leads to a clear interpretation that if any of the specified excluded services stand utilized for providing one or more of the specified services, the exclusion would not apply. A s per the settled principle of law, no word in the legislation has to be ignored. We cannot shut our eyes to the expression except for the provisions of one or more of the specified services appearing in the said exclusion clause. The second exception carved out in the first exception leads to make two negatives as positive and it has to be interpreted as the construction services used for further construction services have to be treated as an eligible input services - thus the services of the sub-contractors utilized for their output services of construction of power plant would be an admissible Cenvatable services. Extended period of limitation - HELD THAT - The appellant being a Public Sector Undertakings cannot be saddled with any mala fide so as to justifiably invoke the longer period of limitation - the demand being barred by limitation is also liable to be set aside. Appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Availability of Cenvat credit on service tax paid by sub-contractors for 'Commercial or Industrial Construction Services'.
2. Interpretation of the exclusion clause in the definition of 'Input Service' post-amendment from 01/04/2011.
3. Validity of the demand raised invoking the extended period of limitation.

Issue 1: Availability of Cenvat credit on service tax paid by sub-contractors for 'Commercial or Industrial Construction Services':

The appellant, a Public Sector Undertaking engaged in setting up a Power Plant, subcontracted construction activities to sub-contractors who paid service tax under 'Commercial or Industrial Construction Services'. The appellant availed Cenvat credit for the same. However, a show cause notice was issued proposing to deny the credit due to an amendment excluding such services from the definition of 'Input Service'. The Commissioner of Service Tax confirmed the tax demand and denied the credit. The main issue was whether the service tax paid by sub-contractors would be available as credit to the appellant for further utilization in providing the same services. The Tribunal analyzed the amended provisions of the definition of 'Input Service' and concluded that the construction services used for further construction services should be treated as eligible input services. Therefore, the services of sub-contractors for constructing the power plant were deemed admissible Cenvatable services.

Issue 2: Interpretation of the exclusion clause in the definition of 'Input Service' post-amendment from 01/04/2011:

The Tribunal examined the exclusion clause in the definition of 'Input Service' post-amendment from 01/04/2011. The clause specified certain services excluded from availing Cenvat credit if used for specific purposes like construction of buildings or civil structures. However, an exception stated that if the excluded services are used for providing one or more of the specified services, the exclusion would not apply. The Revenue contended that construction services used for building construction were specifically excluded and, therefore, not admissible as input services. The Tribunal emphasized that no word in legislation should be ignored and highlighted the exception allowing the use of excluded services for providing other specified services. By interpreting this exception, the Tribunal held that construction services used for further construction services should be considered eligible input services.

Issue 3: Validity of the demand raised invoking the extended period of limitation:

The demand was raised by invoking the extended period of limitation. However, the Tribunal noted that the appellant, being a Public Sector Undertaking, could not be subject to mala fide intentions justifying the longer limitation period. Consequently, the Tribunal held that the demand, being barred by limitation, should be set aside. Therefore, the appeal was allowed on merits and limitation grounds, and the impugned order was overturned.

This detailed analysis of the judgment from the Appellate Tribunal CESTAT ALLAHABAD provides a comprehensive understanding of the issues involved and the Tribunal's reasoning and decision on each issue.