2020 (9) TMI 696 - AT - Service Tax

CENVAT Credit - input services - construction of landfill in setting up of Common Hazardous Waste Treatment, Storage and Disposal Facility on Build, Own and Operate basis - denial on the ground that the same is a works contract service involving civil construction that was covered under the exclusion clause of the definition of input services under Rule 2(l)(A)(a) of the CENVAT Credit Rules, 2004 - HELD THAT - Going by the language of para 3 of the show-cause notice one thing is clear that setting of landfill is a mandatory requirement of the guidelines set by the State Pollution Control Board and the said construction was made for storage and disposal of Hazardous Waste which can be equated with construction of immovable property but not other than plant and machinery as found in the definition of works contract services. Further, it is difficult to arrive at a definite conclusion if the said setting up of a landfill is civil structure or not, in view of the fact that civil structure has to be a structure of a permanent nature and the life of landfill ends after the same gets fill up, as has been reflected in para 9 of the show-cause notice. Even by going through the definition contained in Rule 2(l) of CENVAT Credit Rules, 2004 dealing with exclusion clause, service portion in the execution of a works contract and construction service including services listed under clause B of Section 67E of the Finance Act excluding all other specified services therein are only excluded from the definition of inputs service and not the whole portion of work including raw material used etc. However, in the demand raised against the appellant, every expenditure concerning setting up of the landfill and tax paid there on was taken into consideration to deny the credits on the entire amount. Extended period for imposition of penalty - HELD THAT - The contradictory findings by two Commissioners on the same issue would demonstrably illustrate that issue involved in this litigation is interpretative in nature that would defeat invocation of extended period for imposition of penalty on the appellant. Moreover, the subsequent Commissioner, in the similar facts of the case and issue involved therein, had hold a finding that such landfill is not a civil structure . Having regard to the fact that only service portion of the civil structure is disallowed for CENVAT credit and the landfill setup had a very limited life span that help in storage and disposal of Hazardous Waste and setting up of such landfill is a mandatory requirement in waste management as per guidelines of the State Pollution Control Board, we have no hesitation to hold a finding that credit taken by the appellant in setting up of such landfills are admissible credits. Appeal allowed - decided in favor of appellant.

Summary

Issues:

1. Denial of CENVAT credit for construction of landfill in setting up of Hazardous Waste Treatment Facility.
2. Legality of duty demand and penalty imposed for improper availment of CENVAT credit.
3. Interpretation of 'civil structure' and exclusion of works contract services from definition of 'input services'.

Issue 1: Denial of CENVAT Credit for Construction of Landfill

The appellant challenged the denial of CENVAT credit for constructing a landfill as part of setting up a Hazardous Waste Treatment Facility. The appellant argued that the landfill creation was a mandatory requirement as per State Pollution Control Board guidelines and should not be considered a civil structure. The Tribunal noted that the landfill was essential for waste management and had a limited lifespan, making it different from a permanent civil structure. The Tribunal held that the credits for setting up such landfills were admissible.

Issue 2: Legality of Duty Demand and Penalty

The appellant faced duty demands and penalties for allegedly improper availment of CENVAT credit. The appellant contested the demands and penalties imposed by the adjudicating authority and the Commissioner (Appeals). The Tribunal reviewed the orders and found discrepancies in the interpretation of 'civil structure' and the exclusion of works contract services from 'input services'. The Tribunal concluded that the demands and penalties were not justified, leading to the orders being set aside.

Issue 3: Interpretation of 'Civil Structure' and Exclusion of Works Contract Services

The main issue revolved around whether the construction of a landfill fell under the exclusion clause of 'input services' as per the CENVAT Credit Rules, 2004. The appellant argued that the landfill construction did not constitute a civil structure based on State Pollution Control Board guidelines. The Tribunal analyzed the definition of 'civil structure' and the nature of the landfill construction process. It was observed that contradictory findings by different authorities highlighted the interpretative nature of the issue. Ultimately, the Tribunal held that the credits for setting up the landfill were admissible, overturning the previous orders.

In conclusion, the Tribunal allowed the appeals, setting aside the orders imposing duty demands and penalties on the appellant for the construction of the landfill in the Hazardous Waste Treatment Facility setup. The judgment emphasized the admissibility of credits for essential waste management infrastructure and the interpretative nature of determining 'civil structure' in such cases.