2023 (6) TMI 239 - AT - Service Tax

Recovery of CENVAT Credit wrongly availed alongwith interest and penalty - input service or not - dredging service - case of Revenue is that the dredging service is not required by the Appellant for providing the output service and consequently, there was no direct nexus between the dredging service and output port services. HELD THAT - In case of Adani Port SEZ Ltd. 2015 (12) TMI 1060 - CESTAT AHMEDABAD , it was held that any service used by a service provider for providing Port Service in any manner, is eligible for credit. The definition of input service by way of means and includes also amplify the scope of the same. Further, the definition also mentions certain specific services. The definition also includes services used in relation to activities relating to business . These further enlarge the scope of the input services. The net result of such a wide definition as rightly held by the High Courts and Tribunal, is that any input service which has any nexus or is in relation to the output services in any manner whatsoever, or is in relation to the activities relating to business would be eligible for credit. Therefore, the appellants would be eligible to take credit on the input services where they are able to satisfy the above criteria. In case of Essar Bulk Terminal Ltd. 2021 (9) TMI 816 - CESTAT AHMEDABAD , it was held that in the present case also as regard the service provision of dredging service there is a direct contract between the service provider viz M/s. Van Oard Dredging and Marine Contractor and M/s. Van Oard India Pvt. Ltd. and the appellant. The said service providers rendered the service to the appellant only and not to the Gujarat Maritime Board. Therefore, the appellant being the sole recipient of the service entitled for the Cenvat credit. It also not disputed that the entire service charges along with service tax there on for dredging of navigation channel was paid by the appellant to the aforesaid contractors who carried out the dredging services. In this undisputed fact the appellant is the service recipient for dredging service which is undisputedly used for providing Port Services and cargo handling services, hence, the appellant is entitled for taking Cenvat credit on dredging services. From the above decisions, it is evident that the dredging services have been held as input service for providing the output port services. It has been held in the case of Essar that it is the person namely the appellant who has received the said services to provide the output service to his clients and not the Government under whose license/ lease agreement the service provider is from the port area. Since both the issues on which the credit has been sought to be denied have been decided in the favour of the appellant by the CESTAT we do not find any merits in the impugned order denying the credit. Appeal allowed.

Summary

Issues Involved:
1. Eligibility of Cenvat Credit on Capital Dredging Services.
2. Whether the dredging services were rendered to Maharashtra Maritime Board (MMB) or the appellant.
3. Denial of credit on the ground that services were received outside the customs area of Jaigarh port.

Summary:

1. Eligibility of Cenvat Credit on Capital Dredging Services:
The main issue was whether the Cenvat credit availed on capital dredging services by the appellant is eligible as 'input service'. The impugned order denied the credit on the grounds that the dredging services were used for the development and construction of the port, which is an exempt service, and not for providing taxable port services. The Tribunal referred to several precedents, including the cases of Adani Port & SEZ Ltd. and Essar Bulk Terminal Ltd., which established that dredging services are indeed input services for providing port services. The Tribunal concluded that the appellant is entitled to the Cenvat credit on dredging services used for providing output port services.

2. Whether the Dredging Services were Rendered to MMB or the Appellant:
The show cause notice alleged that the dredging services were actually rendered to MMB and not to the appellant, thus making the credit inadmissible. The Tribunal examined the concession agreement between MMB and the appellant, which granted the appellant the exclusive license to design, finance, construct, operate, maintain, and manage the port complex. The Tribunal found that the services were indeed received by the appellant for the purpose of providing port services and not for MMB. Therefore, the credit could not be denied on this ground.

3. Denial of Credit on the Ground that Services were Received Outside the Customs Area of Jaigarh Port:
The impugned order also denied the credit on the basis that the dredging services were carried out outside the customs area of Jaigarh port. The Tribunal noted that there is no condition under the definition of 'input service' that the services should be used within the factory of production or within the customs area. Consequently, the denial of Cenvat credit on this ground was found to be unsustainable.

Conclusion:
The Tribunal allowed the appeal, holding that the appellant is entitled to the Cenvat credit on dredging services used for providing output port services. The impugned order denying the credit was set aside.