2022 (4) TMI 729 - AT - Central Excise

CENVAT Credit - input services - Erection Commissioning and Installation Services - Works Contract Services - credit on ECIS was denied on the ground that this service is falling under the exclusion clause in the definition of input service under Rule 2 (l) of Cenvat credit rules 2004 - extended period of limitation - HELD THAT - The capital goods/ structure for which ECIS service was received is clearly in respect of the plant and machinery which are itself capital goods. Therefore it is not coming out from the fact as reproduced above that the ECIS services were received for execution of Works contract and/or construction of building or civil structure. The Adjudicating Authority in his finding has contended that the works contract and /or construction of building does not mean only a building which is made of cement steel etc but building of any nature falls under the category of construction in general - In the present case ECIS is in respect of plant and machinery which does not amount to construction of building and which by any stretch of imagination cannot be amount to construction of a building or a civil structure. Therefore the ECIS in the facts of the present case do not fall under exclusion category. We agree with the submission of the appellant in as much as the construction of the building or civil structure which is in the nature of building. However in the present case ECIS was used not for constructing any building or civil structure whereas the ECIS /WCS was used only for plant and machinery which are the capital goods. It is clear that the construction means commercial or industrial construction of a building or a civil structure or a part there of. However the exclusion provided in the definition in respect of roads airports railway transport terminal bridge tunnel and dam etc further reinforce the contention of the appellant that only those constructions which is in respect of building and civil structure will fall under construction. However in the present case the ECIS services were not used for construction of building or a civil structure it is admittedly used for erection installation of plant and machinery therefore the ECIS were not used for construction of building or civil structure. The revenue relied upon the Board Circular No. 80/10/2004-ST dated 17.09.2004 which clarified that erection involves civil structure which otherwise fall under the category of construction service - in a composite work if along with ECIS the service of civil structure is involved only those can be categorized under construction service. This rather helps the case of the appellant in as much as the ECIS service is independent without involving any work contract. Therefore the ECIS alone will not fall in the construction service. There is no dispute that the ECIS service is in respect of technological mechanical or industrial structure the fabrication of such structure by any stretch of imagination cannot be construed as construction of civil structure. As per the Finance Act 1994 reference to civil structure is construction using steel cement sand etc and to a similar building road dam airport etc. therefore there is a vast difference between the civil structure building etc. and technological structure which in the present case the appellant have erected and installed by using ECIS - The appellant have availed credit with respect of fabrication in respect of pipe supports which are nothing but pipe fittings and are covered under the definition of capital goods under Rule 2(a) of Cenvat Credit Rules 2004 admittedly the appellant availed the Cenvat Credit only for installing and commissioning of the technological structure which cannot be said to be activity of making structure for support of capital goods. The service provider has classified the services under ECIS and not under Construction Service and paid service tax under the head of ECIS. The ECIS Service independently not covered under the exclusion clause therefore for this reason also credit cannot be denied. There is a catena of case laws wherein it was held that the classification of service cannot be disturbed or challenged at the end of service recipient particularly for denial of cenvat credit. Once the classification is finalized at the service provider end the same cannot be altered at the service recipient end. Any service of any nature if it is used for modernization and renovation or repair of the existing factory are indeed input services in terms of Rule 2(l) of Cenvat Credit Rules 2004. On this ground also the appellant are entitled for Cenvat Credit in respect of ECIS which were used in relation to modernization and renovation of the existing factory - In the facts of the present case the appellant being the manufacturer of excisable goods availed the credit on ECIS. In these circumstances the exclusion clause is not applicable to the appellant. For this reason also the denial of credit on ECIS is not sustainable. Extended period of Limitation - HELD THAT - The information sought for during the audit was details of Cenvat credit on the service availed in relation to construction of civil structure and for support of capital goods. As per the submission of the appellant it is their bona fide belief that no credit whatsoever has been availed by it on any construction services let alone the service which has been used for construction of civil structures or for making the structure for support of capital goods would not have furnished the information called for. Therefore it cannot be said that the appellant have suppressed the fact wilfully with intent to take wrong cenvat credit - it cannot be said that the appellant have wilfully suppressed the facts with intent to avail wrong credit - the demand for the extended period is not sustainable on the ground of limitation also. The appellant have correctly availed the cenvat credit in respect of ECIS therefore the demand of cenvat credit on ECIS service is not sustainable - appeal allowed - decided in favor of appellant.

Summary

Issues Involved:

1. Classification of services provided by service providers.
2. Applicability of exclusion clause under Rule 2(l) of Cenvat Credit Rules, 2004.
3. Eligibility of Cenvat credit on ECIS and WCS services.
4. Interpretation of construction services in the context of Cenvat Credit Rules.
5. Invocation of extended period of limitation for raising the demand.

Detailed Analysis:

1. Classification of Services Provided by Service Providers:

The adjudicating authority admitted that the services provided by the service providers were correctly classified under ECIS. However, it later held that the services availed by the appellant were construction services used for making structures for support of capital goods, conflicting with its own findings and the law laid down by the Supreme Court in CCE vs. MDS Switchgear Ltd and Sarvesh Refactories (P) Ltd vs. CCE. The appellant argued that once the classification of services was finalized at the service provider end, it could not be disturbed at the recipient end, a contention supported by the Finance Act, 1994 and Service Tax Rules, 1994.

2. Applicability of Exclusion Clause under Rule 2(l) of Cenvat Credit Rules, 2004:

The adjudicating authority disallowed the Cenvat credit on the ground that the services fell under the exclusion clause in the definition of input services. The appellant contended that the services availed were not covered by the exclusion clause as they were classified under ECIS, not construction services. The exclusion clause was interpreted to align with the Negative List regime of services introduced post-01.07.2012, but the appellant argued that ECIS and WCS (in respect of ECIS) were never excluded from the definition of input services both before and after 01.07.2012.

3. Eligibility of Cenvat Credit on ECIS and WCS Services:

The appellant argued that the services availed were for modernization and expansion of its manufacturing facilities, not for construction of buildings or civil structures. The credit availed was for installing and commissioning technological structures, which are parts, components, and accessories of capital goods. The adjudicating authority's contention that the services were used for making structures for support of capital goods was refuted by the appellant, who provided evidence that the services were for parts of capital goods themselves.

4. Interpretation of Construction Services in the Context of Cenvat Credit Rules:

The appellant argued that the term "construction services" should be interpreted in the context of the Finance Act, 1994 and Cenvat Credit Rules, 2004. The adjudicating authority's reliance on dictionary meanings and examples like the Eiffel Tower was deemed inappropriate. The appellant cited various judgments and circulars to support the interpretation that construction services are distinct from services like ECIS, which are not covered by the exclusion clause.

5. Invocation of Extended Period of Limitation for Raising the Demand:

The appellant argued that the extended period of limitation was invoked only because the appellant did not provide information during the audit, which is not a valid ground for invoking the extended period. It was contended that there was no willful suppression of facts, and the issue involved interpretation of the exclusion clause, which has been a subject of litigation. The demand for the extended period was found unsustainable on the grounds of limitation.

Conclusion:

The appellate tribunal found that the appellant correctly availed the Cenvat credit on ECIS services, which were not covered under the exclusion clause. The services were used for modernization and expansion of the manufacturing facilities, not for construction of buildings or civil structures. The classification of services at the service provider end could not be disturbed at the recipient end. The invocation of the extended period of limitation was also found unsustainable. The impugned order was set aside, and the appeal was allowed with consequential relief.