2023 (9) TMI 55 - AT - Central Excise

Recovery of CENVAT Credit alongwith interest and penalty - input services - setting up of a factory - denial of credit on the input services availed for setting up of a factory' as the same has been specifically omitted from the includes part of the definition vide Notification No. 03/2011 dated 01.03.2011, w.e.f. 01.04.2011 - HELD THAT - In the case of M/S BHARAT COKING COAL LTD. VERSUS COMMR. OF CENTRAL EXCISE S. TAX, RANCHI 2021 (10) TMI 383 - CESTAT KOLKATA the Tribunal Kolkata, allowed CENVAT Credit of the service tax paid towards setting up of plant. The subject input services have a direct nexus with the manufacture of finished goods in the means clause of the definition of input services. Accordingly even if the word setting up of a factory has been specifically excluded from the definition w.e.f. 01.04.2011, such services are covered within the ambit of main clause of the definition. Hence, it would still qualify as an input service as per Rule 1(I) of CCR, 2004. Cenvat credit availed by the Appellant on the input services used in setting up of the factory is allowed - impugned order confirming the demand along with interest and imposing penalty is set aside - appeal allowed.

Summary

Issues Involved:
1. Whether the input services availed for 'setting up of a factory' are covered under the definition of 'input services' post Notification No. 03/2011-CE (NT) dated 01.03.2011.
2. Whether the Appellant is entitled to CENVAT Credit on such input services.

Issue-wise Summary:

1. Definition of 'Input Services' Post Notification No. 03/2011-CE (NT):
The primary issue revolves around the interpretation of 'input services' under Rule 2(I) of the CENVAT Credit Rules, 2004, as amended by Notification No. 03/2011-CE (NT) dated 01.03.2011, effective from 01.04.2011. The Appellant argued that the input services used for setting up the factory should be considered as 'input services' since they are directly related to manufacturing activities. The Tribunal noted that the definition of 'input services' includes services used directly or indirectly in relation to the manufacture of final products. The services used for setting up the factory, although not explicitly mentioned in the inclusive part of the definition, fall within the 'means clause' of the definition.

2. Entitlement to CENVAT Credit:
The Tribunal examined whether the services used for setting up the factory qualify as 'input services' under the amended definition. It referred to previous judgments, including Pepsico India Holdings Pvt. Ltd. Vs. CCT, Tirupati, and M/s Bharat Coking Coal Ltd. Vs. CCE & ST, Ranchi, where it was held that services used for setting up a factory are covered under 'input services' as they are directly related to manufacturing activities. The Tribunal concluded that the input services used for setting up the factory are covered within the 'means clause' of the definition and are not specifically excluded under the 'excludes clause.' Therefore, the Appellant is entitled to CENVAT Credit on such input services.

Conclusion:
The Tribunal allowed the appeal, setting aside the impugned order that confirmed the demand along with interest and imposed penalties. The Tribunal held that the input services used for setting up the factory qualify as 'input services' under Rule 2(I) of the CENVAT Credit Rules, 2004, and the Appellant is entitled to avail CENVAT Credit on such services.