2023 (6) TMI 700 - AT - Service Tax

CENVAT Credit - inputs - Cement and Steel used in the output service i.e. Commercial and Industrial Construction Services - denial of the Cenvat is solely on the basis of amendment in explanation-2 to definition of Input by Notification No. 16/2009-CE (NT) - HELD THAT - The explanation-2 is exclusively applicable to manufacturer and not to service provider. Therefore, the entire case based on the amendment in explanation-2 cannot sustain. Further, as regards the admissible inputs for the purpose of Cenvat credit, it falls under clause-(ii) of the definition of inputs according to which the Input includes all goods except light diesel oil, high speed diesel oil, motor spirit, commonly known as petrol and motor vehicles used for providing any output service. A plain reading of clause(ii) of definition read with explanation-2, it is absolutely clear that the exclusion provided in explanation-2 is applicable to manufacturer and as regard the service provider in terms of clause(ii) of definition Input the service provider is entitled for Cenvat credit of inputs which are used for providing output service. In the present case, the appellant provided output service viz. Commercial and Industrial Construction Service and for that Cement and Steel are vital input without which output service cannot be provided. Therefore, there is no doubt that appellant is legally entitled for the Cenvat credit on Cement and Steel used for providing output service i.e. Commercial and Industrial Construction Services. The judgments cited by learned Counsel in the case of MUNDRA PORTS AND SPECIAL ECONOMIC ZONE LIMITED VERSUS COMMISSIONER OF CENTRAL EXCISE CUSTOMS 2015 (5) TMI 663 - GUJARAT HIGH COURT , the credit of Cement and Steel was allowed against the output service of Port Service. Even though cement and steel was directly used for output service for construction of jetty and then jetty was used for services, credit was allowed. On the face of judgment, the case of the appellant is on much better footing as in the present case the cement and steel was directly used in Commercial and Industrial Construction Services. There are no hesitation to hold that appellant is legally entitled for Cenvat credit on Cement and Steel used for providing output service - appeal allowed.

Summary

Issues involved:
The issue involved in the present case is whether the appellant is entitled to Cenvat credit for inputs like Cement and Steel used in the output service of Commercial and Industrial Construction Services on which service tax has been paid.

Judgment Details:

Issue 1 - Cenvat Credit Eligibility:
The appellant argued that the denial of Cenvat credit was based on an erroneous interpretation of the amendment in explanation-2 to the definition of Input by Notification No. 16/2009-CE (NT). The appellant contended that the exclusion provided in explanation-2 is applicable to manufacturers and not to service providers. They cited various judgments supporting their claim, including Bharti Airtel Limited vs. Commissioner of Central Excise Pune and Indian Oil Corporation Limited vs. Commissioner of Central Excise, Ahmedabad. The Deputy Commissioner representing the Revenue reiterated the findings of the impugned order.

Analysis and Decision:
The Tribunal examined the definition of "Input" before and after the amendment in explanation-2. The explanation-2, post-amendment, excluded certain items like cement and steel used for construction from the definition of Input for manufacturers. However, the Tribunal noted that this exclusion does not apply to service providers. As per the definition, service providers are entitled to Cenvat credit on inputs used for providing output services. In this case, the appellant provided Commercial and Industrial Construction Services, where Cement and Steel were essential inputs. Referring to the judgment in Mundra Ports & Special Economic Zone Ltd vs. CCE & Cus., where credit for Cement and Steel was allowed for Port Services, the Tribunal concluded that the appellant is legally entitled to Cenvat credit for Cement and Steel used in providing output services. Therefore, the impugned order was set aside, and the appeal was allowed with consequential relief.

Conclusion:
The Tribunal ruled in favor of the appellant, stating that they are entitled to Cenvat credit on Cement and Steel used for providing Commercial and Industrial Construction Services. The impugned order was overturned, and the appeal was allowed with consequential relief.