2019 (10) TMI 1032 - AT - Central Excise

CENVAT Credit - input services - case of the department is that the services were used for setting up of a new plant - It was contended that with effect from 01.04.2011, the setting up of factory has been removed from the inclusive clause of the definition of the Input Service. HELD THAT - There is no dispute that the appellant have an existing manufacturing factory wherein many other plants and machinery and two furnace were already setup and with the said existing facility, the appellant are manufacturing excisable goods for last many years. For enhancing their production, the appellant set up a new furnace, it cannot be said that they have setup a new factory. It is merely an expansion of the existing factory and therefore, even if the term setting up of factory is removed from the inclusion clause of definition of input service, it does not adversely affect the appellant to avail Cenvat credit on various services - Moreover, as per the amendment in Rule 2(l) of Cenvat Credit Rules, 2004 certain services were excluded from the definition of Input Service and only those services were not be eligible for Cenvat credit. The services in question in the present case, do not fall under the exclusion clause. For this reason, the appellant‟s claim for availment of Cenvat credit cannot be rejected - appeal allowed - decided in favor of appellant.

Summary

Issues:
Cenvat credit eligibility for services used in setting up a new furnace within an existing factory post 01.04.2011.

Analysis:
The appellant, an existing glass bottle manufacturing factory, installed a new furnace within the facility and claimed Cenvat credit for services like erection, installation, and engineering. The dispute arose as the department disallowed credit post 01.04.2011, citing the exclusion of "setting up of factory" from the definition of Input Service. The appellant argued that the new furnace was an expansion of the existing facility, not a new factory setup. They relied on various judgments supporting their claim, emphasizing that the services used fell under the main clause of the Input Service definition. The Revenue contended that a new plant was set up, not just a furnace, thus credit inadmissible post 01.04.2011. The Tribunal noted the existing facility's history, concluding that the new furnace was an expansion, not a new factory setup. The exclusion clause did not cover the services used, making the credit admissible.

In a similar case, the Tribunal allowed Cenvat credit for services related to machinery erection, emphasizing the nexus with manufacturing. The Tribunal reiterated that even without the term "setting up of factory" in the inclusive clause, credit eligibility must align with the main definition, covering services directly or indirectly related to manufacturing. The installation of the new furnace directly contributed to the final product's manufacture, making the services eligible for credit. The Tribunal distinguished a prior judgment cited by the Revenue, highlighting the different factual context of a new factory setup in that case. Consequently, the impugned order was set aside, and the appeal allowed, affirming the appellant's entitlement to Cenvat credit for the services utilized in setting up the new furnace within the existing manufacturing facility.