2022 (5) TMI 1038 - AT - Central Excise

CENVAT Credit - input services - construction services - fee for architectural structural works for factory plant building - group Medi-claim Insurance - Group personal accident insurance - insurance, motor car/vehicle insurance - labour charges for installation - testing commissioning of components of VRV System (Centrally AC system) in the office building etc. - HELD THAT - Right from beginning the appellant is taking a stand that construction and architectural services are used for repair and renovation of factory. This submission of the appellant was not effectively rebutted by the Revenue and the Cenvat credit was denied by the lower authorities on the ground that construction service is excluded and appearing in the exclusion clause which were brought in the statute vide Notification No. 3/2011-CE (NT) dated 01.03.2011. On this basis the credit on Construction and Architectural services was denied. The credit in respect of group Medi-claim Insurance, Group personal accident insurance, insurance, motor car/vehicle insurance etc. were denied on the ground these services have no nexus with the manufacturing of excisable goods. Construction and Architectural services - HELD THAT - These services were used for repair and renovation work in the existing factory. As held in various judgments only such construction services which are used in initial setting up of factory are excluded. However, in the present case, the factory was already existing and this construction and architectural service were used for repair and renovation of the existing factory plant. As per the inclusion clause of definition of Input Services, repair and renovation/ modernization is specifically included in the inclusion clause. Therefore, construction or architectural service if used for initial set up of plant will only be ineligible for Cenvat credit. Whereas as per facts in the present case, the services were used for repair and renovation hence, the credit in terms of inclusion clause of Input Service is admissible. Medi-claim Insurance - Group personal accident insurance - insurance - motor car/vehicle insurance etc. - HELD THAT - Tese are the services as mandated as per the factory Act for the safety of employees. Therefore, this cannot be said that the services were used for personal use. Every industry under statutory norms required to take group Medi-claim Insurance, Group personal accident insurance, insurance, motor car/vehicle insurance etc. from the insurance companies for which the payment of premium is paid by the assessee and the same is accounted in their books of accounts as expenditure. Therefore, all these services are in or in relation to manufacture of final products and under the business activities of the assessee - All the services have been considered as admissible Input services - it can be seen that Cenvat credit is allowed on Insurance Services. The appeal is partly allowed.

Summary

Issues:
Entitlement to Cenvat credit for various input services including construction services, architectural works, insurance, labor charges, etc.

Analysis:

1. Construction and Architectural Services:
The appellant claimed Cenvat credit for construction and architectural services used for repair and renovation of an existing factory. The Revenue argued that these services are excluded from Input Services. The Tribunal noted that construction services used in the initial setup of a factory are excluded, but for repair and renovation, they are admissible under the inclusion clause. As the services were used for repair and renovation of an existing factory, the credit was deemed admissible.

2. Other Services (Insurance, Labor Charges, etc.):
The appellant also sought credit for group Medi-claim Insurance, Group personal accident insurance, motor vehicle insurance, etc. The Revenue contended that these services lacked nexus with manufacturing excisable goods. However, the Tribunal held that these services, being statutory requirements for employee safety, are integral to business activities and considered admissible as input services. Citing various judgments, the Tribunal established the admissibility of Cenvat credit on such services.

3. Judicial Precedents:
The Tribunal referred to several judgments supporting the admissibility of Cenvat credit on insurance services, reinforcing the appellant's entitlement to credit for the disputed services. The Tribunal allowed the appeal partly, upholding the appellant's entitlement to credit while setting aside the disputed amount for further proceedings. Additionally, the Tribunal clarified that interest and penalty were not applicable to the amount already paid by the appellant but not utilized, modifying the impugned order accordingly.

In conclusion, the Tribunal ruled in favor of the appellant, allowing Cenvat credit for the input services in question, emphasizing the admissibility of credit for services related to repair, renovation, and employee safety as integral to business activities. The judgment highlighted the importance of statutory compliance and business necessity in determining the eligibility of services for Cenvat credit, providing a comprehensive analysis of each issue raised in the appeal.