2023 (8) TMI 11 - AT - Central Excise

Wrongful availment of CENVAT Credit - input services - Erection and Commissioning of Spray Drying Plant - Rule 2(l) of CCR, 2004 - HELD THAT - The exclusion clause (A) in sub-clause (b) talks about laying of foundation or making of structures and does not specifically cover the services of Erection and Commissioning. It is a settled principal that exclusion clause has to be construed strictly and narrowly and therefore logically exclusion has to be expressed and not implied. It is not the case of the revenue that while rendering the services of erection and commissioning they have to lay the foundation or has to raise structures - the exclusion clause does not apply to service of erection and commissioning and hence it would fall under the main clause of input service since it is directly related to the manufacturing activity of the appellant. Secondly, the demand in the show cause notice on this account also fails as nothing has been substantiated and as noticed by the adjudicating authority that the show cause notice has been issued in a very casual manner. The appellant has referred to few decisions by the Tribunal to say that exclusion clause (A) in Rule 2(l) of CCR,2004 does not cover the service in the nature of Erection, Commissioning and Installation Service , THERMAX LTD. VERSUS COMMISSIONER OF C. EX. S.T., VADODARA 2019 (2) TMI 1876 - CESTAT AHMEDABAD , M/S ORIENT CEMENT LTD. VERSUS THE COMMISSIONER C. CE ST, HYDERABAD-I 2017 (1) TMI 1124 - CESTAT HYDERABAD - In HINDUSTAN COCA COLA BEVERAGES PVT. LTD. VERSUS C.C.E., CHENNAI-I 2016 (10) TMI 1092 - CESTAT CHENNAI , the view taken was that when erection and commissioning of water treatment plant was essential, there should not be denial of cenvat credit of service tax paid in respect of such service availed for recycling of the water for use in manufacture - The present case is squarely covered by the said observations and therefore the services of Erection of 2 TPH Detergent Spray Drying Plant received by the appellant are covered under the main clause of the definition of input service. Since the issue has been decided on merits in favour of the appellant, the issue of limitation does not survive and hence is not required to be considered any more. Appeal allowed.

Summary

Issues:
The appeal challenges the Order-in-appeal dated 20.12.2022 passed by the Commissioner (Appeals), Customs & CGST and Central Excise, Indore, M.P. The main issue is whether the appellant is entitled to avail the cenvat credit on the services of Erection and Commissioning of Spray Drying Plant in terms of the definition of 'input service' as defined under Rule 2(l) of Cenvat Credit Rules, 2004.

Details of the Judgment:

Issue 1: Allegations of Wrong Availment of Cenvat Credit
The appellant was alleged to have wrongly availed cenvat credit on maintenance charges, erection and commissioning services, and capital goods. The adjudicating authority upheld the allegations related to the wrong availment of cenvat credit on Erection and Commissioning and supply of Baffle Plate. The Commissioner (Appeals) allowed the cenvat credit towards supply of Baffle Plate, leading to the present appeal challenging the disallowance of the cenvat credit towards Erection and Commissioning services.

Issue 2: Entitlement to Cenvat Credit on Erection and Commissioning Services
The appellant argued that the input service credit on the invoices of erection of plants is covered under the provisions of Cenvat Credit Rules, 2004, as it has a direct nexus with the manufacturing of detergent products. The revenue contended that these services fall under the exclusion clause of the definition of input service. The Tribunal analyzed the definition of 'input service' under Rule 2(l) and concluded that the exclusion clause does not apply to services of erection and commissioning since they are directly related to the manufacturing activity of the appellant. Previous tribunal decisions were cited to support the appellant's position, and it was held that the services of Erection of Detergent Spray Drying Plant are covered under the main clause of the definition of input service.

Conclusion:
The Tribunal set aside the impugned order and allowed the present appeal in favor of the appellant. Since the issue was decided on merits in favor of the appellant, the issue of limitation was deemed unnecessary to consider further. The appeal was accordingly allowed on 31st July 2023.