2019 (8) TMI 200 - AT - Central Excise

CENVAT Credit - input services - Repair and Maintenance service - Erection, Installation and Commissioning service - Consulting Engineering Service used for expansion of the production capacity - credit was denied on the ground that the setting up of the factory has been removed from the inclusion clause of definition - as per assessee it is only expansion of existing production capacity - HELD THAT - The ground for denial of the cenvat credit by the lower authority is that since setting up has been removed from the inclusion clause of definition, the credit in respect of setting up of the factory is not admissible. As per the facts of the present case, the factory is already existing and running its production, it is only expansion of existing production capacity, therefore, it cannot be said that there is setting up of the new factory. Moreover, the services were not excluded in the exclusion category as brought in definition of input service w.e.f. 01.04.2011. Therefore, all the services were used in or relation to the manufacture of final product as the expanded production capacity is only for manufacture of final product. Credit allowed - appeal allowed - decided in favor of appellant.

Summary

Issues:
Whether the appellant is entitled to cenvat credit for Repair and Maintenance, Erection, Installation, Commissioning, and Consulting Engineering Service used for the expansion of production capacity.

Analysis:
The appellant's counsel argued that cenvat credit was denied based on the removal of "setting up of the factory" from the inclusion clause of the definition. However, all services were utilized for expanding the existing production capacity, not for setting up a new factory. Even after the removal of "setting up" from the inclusion category, credit should be admissible. The services were directly or indirectly related to the manufacture of the final product due to the expansion of production capacity. The appellant cited various judgments to support this argument.

The Assistant Commissioner representing the Revenue reiterated the findings of the impugned order.

Upon careful consideration of both arguments and perusal of records, it was observed that the denial of cenvat credit by the lower authority was based on the removal of "setting up" from the inclusion clause. Since the factory was already existing and the production was ongoing, the expansion did not constitute setting up a new factory. Additionally, the services were not excluded from the definition of input service as of a specific date. Therefore, all services were utilized in relation to the manufacture of the final product, as the expanded production capacity was solely for the final product. The judgment cited by the appellant supported their case, leading to the disagreement with the lower authority's decision. Consequently, the impugned order was set aside, and the appeal was allowed.