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2023 (4) TMI 601 - AT - Central ExciseAdmissibility of CENVAT credit on the services availed prior to registration - allegations in the show cause notice that the two units were earlier separate and independent and obtained the common registration only on 31.01.2014 - whether the appellant rightly availed the cenvat credit on input services used by them in connection with setting up of their new unit which has been deleted from the inclusion part of section 2(l) post amendment of the definition of 'input service', w.e.f. 01.04.2011? - HELD THAT - The Apex Court in SARVESH REFRACTORIES (P) LTD. VERSUS COMMISSIONER OF C. EX. CUSTOMS 2007 (11) TMI 23 - SUPREME COURT , dealing with the issue of classification by the manufacturer and the supplier of the goods under a particular heading was please to hold that the appellant who is the consumer of those goods could not get the classification of the manufacturer change. Similarly, the case of COMMISSIONER OF C. EX., JAIPUR-I VERSUS MANGALAM CEMENT LTD. 2017 (4) TMI 499 - CESTAT NEW DELHI , holds that it is well settled position of law that the credit availed by an assessee cannot be denied or varied on the ground that the classification of service should have been made in a different category by the provider of service. Variation in the classification or consequent rate of payment of service tax is not possible at the end of the recipient of service. Once the classification is finalised at the end of the service provider the same cannot be altered at the end of the service recipient - Consequently, the cenvat credit cannot be denied to the appellant on this ground. The demand made by the revenue to deny cenvat credit by the appellant and order its recovery is rejected - question of interest and penalty no longer survives - Appeal allowed.
Issues Involved:
1. Admissibility of CENVAT credit on input services used in setting up a new unit. 2. Impact of the amendment to the definition of 'input service' on CENVAT credit eligibility. 3. Legitimacy of denying CENVAT credit based on the timing of service utilization relative to registration. 4. Classification of services and its implications on CENVAT credit. Summary: 1. Admissibility of CENVAT Credit on Input Services Used in Setting Up a New Unit: The appellant, engaged in manufacturing cement and clinker, sought common registration for its original unit and a new unit (MGU) located 2 km apart. Initially granted, this registration was later contested by the department. However, both the Tribunal and the High Court of Rajasthan upheld the common registration. The appellant availed CENVAT credit on input services used for setting up MGU, which the department disallowed, citing the amendment to the definition of 'input service' effective from 01.04.2011. The Tribunal found the department's stance unsustainable, referencing prior decisions that allowed CENVAT credit for services used in setting up units before registration. 2. Impact of Amendment to Definition of 'Input Service' on CENVAT Credit Eligibility: The core issue was whether the appellant rightly availed CENVAT credit on input services post-amendment of the definition of 'input service.' The Tribunal noted that the omission of 'setting up' from the inclusive clause does not render such services ineligible for credit. It referenced several decisions, including Hindalco Industries Ltd. and Pepsico India Holdings, which interpreted the 'means clause' of the definition to include services used in setting up a plant as 'input services' even after the amendment. 3. Legitimacy of Denying CENVAT Credit Based on Timing of Service Utilization Relative to Registration: The Tribunal rejected the department's argument that CENVAT credit on services availed before the unit's registration was inadmissible. It emphasized that the procurement and utilization of services for setting up MGU occurred before the unit's registration, which is permissible. The Tribunal cited the Madras High Court's decision in Rajshree Sugars & Chemicals Ltd., affirming that services used for setting up a unit under common registration are valid for CENVAT credit. 4. Classification of Services and Its Implications on CENVAT Credit: The Tribunal addressed the department's claim that certain services, like Erection, Commissioning & Installation, and Works Contract services, were related to construction and thus excluded from CENVAT credit. It clarified that these services were used for installing plant and machinery, not for constructing buildings or civil structures, making them eligible for credit. The Tribunal also upheld that the classification of services by the provider cannot be reassessed by the recipient for denying credit. Conclusion: The Tribunal set aside the impugned order, allowing the appeal and rejecting the demand to deny and recover CENVAT credit. The decision emphasized the broad interpretation of 'input service' under the CENVAT Credit Rules, supporting the appellant's eligibility for credit on services used in setting up the new unit.
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