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2023 (2) TMI 826 - AT - Service TaxCENVAT Credit - inputs/input services/capital goods - Cenvat credit availed on goods and services used for setting up of the appellants premises - denial on the ground that the said goods and services were used for construction of immoveable property and not for rendition of the taxable output service - extended period of limitation - HELD THAT - Rule 3 of the Cenvat Credit Rules, 2004 is the enabling provision, which entitles a service provider to take Cenvat credit of Central Excise duty paid on inputs and capital goods and service tax paid on the input services, used for providing the output service. Insofar as the credit availed on services in relation to setting up of the premises from where the output service are to be rendered is concerned, the adjudicating authority has rightly taken cognizance of the definition of input services in Rule 2(l), prior to its amendment when services inrelation to setting up were specifically covered in the inclusive part of the definition of input service. There cannot be any doubt that services, used in relation to setting up of the premises are also services used for providing output service, as without the premises being set up, the service provider cannot effectively render any taxable output service. Hon ble Bombay High Court in the case of M/S. COCA COLA INDIA PVT. LTD. VERSUS THE COMMISSIONER OF CENTRAL EXCISE, PUNE-III 2009 (8) TMI 50 - BOMBAY HIGH COURT , has held that credit would be admissible, if the services are covered by any of the limb of the definition of input service. It is an undisputed position that prior to 01.04.2011 services in relation to setting up of the premises were clearly covered in the inclusive part of the definition of input service squarely,which position has been accepted by the adjudicating authority and has not been disputed by the Revenue in their appeal. Cenvat credit disallowed by the adjudicating authority on the ground that services in respect to setting up had been received after 01.04.2011 - HELD THAT - The assessee-appellant has demonstrated by producing copies of invoices, that none of the services pertaining to setting up were received after 01.04.2011 and that it was merely a case of invoice having been raised after such effective date, in respect of services rendered prior thereto. The assessee-appellant have also demonstrated that some of the services, credit in respect of which have been disallowed on the premise that they were relating to setting up were in fact relating to repairs and maintenance, or activities such as commercial training or coaching, banking andother financial services, etc, credit in respect of which was admissible both under the pre and post amended definition of input service w.e.f. 01.04.2011. The Learned Authorized Representative for Revenue has urged a new contention, which is beyond the scope of the allegation in the notice and the finding in the impugned order, to the effect that even if the services were rendered prior to 01.04.2011, the invoices having been issued post 01.04.2011, applying the provisions contained under the Point of Taxation Rules, the disputed services deemed to be provided after that date - In any case, what is relevant is the completion of the services prior to 01.04.2011, as per the Board Circular No. 943/4/2011-CX dated 29.4.2011, and not the date of deemed provision in terms of the Point of Taxation Rules as has been argued by the Learned AR for the Revenue. CENVAT Credit - inputs/input services - house-keeping - man-power supply - General Insurance - furniture - chemicals for purifying water - electrical items - denial on the ground of nexus - HELD THAT - All that is required is that the goods and services should be used for providing the output services. On the aspect of nexus, the Hon ble Punjab and Haryana High Court in the case of COMMISSIONER OF SERVICE TAX VERSUS CONVERGYS INDIA PVT. LTD. 2010 (8) TMI 47 - PUNJAB AND HARYANA HIGH COURT have held that credit would be admissible even if there is peripheral connection between the input/input service and the service being rendered. To the same effect is the clarification issued by the Board under Circular No. 120/01/2010-ST dated 19.01.2010. There being no dispute that the goods and services on which Cenvat Credit has been availed have actually been used for providing the output service, we are of the view that Cenvat credit cannot be denied to the assesse-appellants. Credit availed goods such as concrete block, tiles, glass, furniture, pre-fabricated building under the head of capital goods, prior to 01.04.2011 - HELD THAT - The Hon ble Gujarat High Court in the case of Mundra Ports SEZ Ltd., 2015 (5) TMI 663 - GUJARAT HIGH COURT have clearly recorded that credit on such items would be admissible as inputs to a service provider prior to 01.04.2011, as the same are required for setting up of the premises from where the services are being rendered. The High Court has clearly recorded that the bar which was introduced in the definition of inputs by explanation (2) w.e.f. 07.07.2009, would apply only to a manufacturer and not to a service provider. Applying the ratio laid down by the Gujarat High Court, the assessee-appellant is entitled to credit on goods used for setting up their premises prior to 01.04.2011 - As has been fairly admitted by the assessee-appellant, that an amount of Rs.38,39,364/- out of the total amount of credit in dispute of Rs.3,25,73,700/- on capital goods pertaining to goods which have been removed as such. The said amount has rightly been reversed as provided for in Rule 3(5) of the Cenvat Credit Rules and that even though credit of such goods could have been admissible, the goods having been cleared as such, reversal in respect of the same was warranted. Insofar as the balance credit which has been reversed during investigation, appropriate relief in accordance with law would be admissible. Denial of credit for failure to produce original of the duty paying document - HELD THAT - There being no dispute regarding receipt, consumption and utilization of the goods covered by the said invoices as also there being no dispute on the fact that at the time of receipt credit had been availed only on the strength of the original of the duty paying documents, we are unable to persuade ourselves to uphold the disallowance of Cenvat credit on this count. Extended period of limitation - HELD THAT - The extended period of limitation is not invokable in the facts and in the circumstances of the present case, as the issue relating to credit on goods and services used for setting up the premises, even if assumed to be contentious, is a issue on interpretation where the courts have ultimately held in favour of the assessee. Insofar as the other credits are concerned, also the aspect of direct nexus or even a peripheral nexus is an issue of interpretation and consequently the extended period cannot be invoked. The appeal filed by the assessee-appellant is allowed, except in respect of the amount of Rs.38,39,364/- which has been rightly reversed on clearance of the goods as such. The appeal filed by the Revenue is dismissed.
Issues Involved:
1. Early hearing of appeals. 2. Disallowance of Cenvat credit on goods and services used for setting up premises. 3. Nexus requirement between input services and output services. 4. Denial of Cenvat credit on capital goods not covered under specified headings. 5. Denial of Cenvat credit due to non-production of original duty paying documents. 6. Invocation of extended period of limitation. Detailed Analysis: 1. Early Hearing of Appeals: The applicants/appellants filed a Misc. Application for the early hearing of Appeal No. ST/86542 of 2015. With the consent of both sides, the Tribunal took up the said appeal along with Appeal No. ST/86218 of 2015 for hearing and passed a common order. 2. Disallowance of Cenvat Credit on Goods and Services Used for Setting Up Premises: The appellants, engaged in rendering taxable services under the category of Information Technology and Information Technology enabled services, availed Cenvat credit on goods and services used for setting up their premises. The adjudicating authority disallowed the credit for services received after 01.04.2011, based on the amendment in the definition of input service. The Tribunal, however, held that services used in relation to setting up premises are also services used for providing output services. The Tribunal cited various judgments supporting this view, including those of the Bombay High Court and the Madras High Court. 3. Nexus Requirement Between Input Services and Output Services: The adjudicating authority's finding that there must be a direct nexus between input services and output services was contested. The Tribunal clarified that the Cenvat Credit Rules do not stipulate a direct nexus requirement. The goods and services merely need to be used for providing the output services. The Tribunal referenced the Punjab and Haryana High Court's decision in Convergys India Pvt Ltd., which held that even a peripheral connection suffices. 4. Denial of Cenvat Credit on Capital Goods Not Covered Under Specified Headings: The adjudicating authority denied credit on certain goods not covered under specified headings of the Central Excise Tariff Act. The Tribunal, referencing the Gujarat High Court's decision in Mundra Ports & SEZ Ltd., held that such goods are entitled to credit as inputs if used for setting up premises before 01.04.2011. The Tribunal also noted that the initial classification as capital goods does not bar subsequent claims as inputs. 5. Denial of Cenvat Credit Due to Non-Production of Original Duty Paying Documents: The adjudicating authority disallowed credit for failure to produce original duty paying documents. The Tribunal found no dispute regarding the receipt, consumption, and utilization of the goods covered by the invoices. It held that non-submission of some original invoices during a later audit could not be a valid ground for denying Cenvat credit. 6. Invocation of Extended Period of Limitation: The Tribunal found merit in the appellant's argument that the extended period of limitation was not invokable. The issues relating to credit on goods and services used for setting up premises and the requirement of direct nexus are matters of interpretation. Therefore, the extended period could not be invoked in the absence of fraud, suppression, etc. Conclusion: The appeal filed by the assessee-appellant was allowed, except for the amount of Rs.38,39,364/- which was rightly reversed on the clearance of goods as such. The appeal filed by the Revenue was dismissed. Cross-objection was disposed of. The order was pronounced in the open court on 02/02/2023.
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