2023 (11) TMI 522 - AT - Central Excise

CENVAT Credit - input services - Various services availed prior to commencement of commercial production in the factory - Emergency Medical Services - HELD THAT - The very same issue as to whether credit on input services is eligible before commencement of production was considered by the Tribunal in the case of PEPSICO INDIA HOLDINGS (PVT.) LTD. VERSUS COMMISSIONER OF CENTRAL TAX, TIRUPATI 2021 (7) TMI 1094 - CESTAT HYDERABAD . In the said case, the Department had denied the credit alleging that the services are used for setting up of factory and it was held that Although setting up the factory is not manufacture in itself, it is an activity directly in relation to manufacture. Without setting up the factory, there cannot be any manufacture. Services used in setting up the factory are, therefore, unambiguously covered as input services under Rule 2(l)(ii) of the Cenvat Credit Rules, 2004 as they stood during the relevant period (post 1-4-2011). The mere fact that it is again not mentioned in the inclusive part of the definition makes no difference. Once it is covered in the main part of the definition of input service, unless it is specifically excluded under the exclusion part of the definition, the appellant is entitled to Cenvat credit on the input services used. A similar issue was considered in the case of INDIAN COPPER CORPORATION LTD. VERSUS COMMISSIONER OF COMMERCIAL TAXES, BIHAR AND OTHERS 1964 (10) TMI 41 - SUPREME COURT , which is also a decision passed analysing as to whether the impugned goods therein would get the benefit of Section 8(1) of the Central Sales Tax Act. These decisions do not have any connection with the facts or law considered in the present case - In the present case, there is no dispute that the appellant is a manufacturer of goods and so also, there is no dispute that the process undertaken by the appellant is manufacture. For these reasons, the decision relied by the Ld. Authorized Representative is of no assistance to the Department. Emergency Medical Services - HELD THAT - The appellant has availed credit on Emergency Medical Services from M/s. Sri Vinayak Hospital to the tune of Rs.31,518/-. It is explained by the Ld. Counsel that being a factory, they have to provide on-site emergency medical services and the unit was set up at the factory in case of any accidents - the said service cannot fall under the ambit of eligible input services as it is not proved that such services are used for personal consumption. For the said reason, the amount of credit availed in respect of Emergency Medical Services is disallowed. Further, the Ld. Counsel also submitted that the appellant had reversed the credit for September 2013 availed for the services provided by the service provider viz. M/s. Lease Plan India Pvt. Ltd. to the tune of Rs.7664.99/- since there was lack of clarity in respect of the said service and that they are not contesting the same - the disallowance of credit in respect of the above service is upheld, as the same is not contested by the appellant. Disallowance of credit availed on Emergency Medical Services provided by M/s. Sri Vinayak Hospital to the tune of Rs.31,518/- is upheld - Disallowance of the credit availed, claimed to be reversed for September 2013, for the services rendered by M/s. Lease Plan India Pvt. Ltd. to the tune of Rs.7664.99/- is upheld - Disallowance and recovery of credit in respect of all the remaining services is set aside. The demand, interest and penalties imposed in respect of all other services are set aside. Appeal allowed in part.

Summary

Issues Involved:
1. Eligibility of CENVAT Credit on input services availed prior to commencement of commercial production.
2. Interpretation of "input service" definition post-01.04.2011.
3. Disallowance of specific services under the amended definition.

Summary:

1. Eligibility of CENVAT Credit on Input Services:
The appellant, M/s. Saint Gobain Glass India Ltd., availed CENVAT Credit on various input services before the commencement of commercial production. The Department argued that these services fall under "services used in relation to setting up of factory," which is ineligible for credit post-01.04.2011 as per the amended definition of "input service."

2. Interpretation of "Input Service" Definition Post-01.04.2011:
The Tribunal examined the definition of "input service" before and after 01.04.2011. Prior to this date, the definition included services used in relation to setting up a factory. Post-amendment, these words were omitted. However, the main part of the definition still includes services used directly or indirectly in or in relation to the manufacture of final products. The Tribunal noted that services used for the commencement of manufacture are in relation to the manufacture of final products.

3. Disallowance of Specific Services:
The Tribunal referenced previous decisions, including M/s. Pepsico India Holdings (Pvt.) Ltd. and M/s. Mangalam Cement Ltd., which held that services used for setting up a factory are covered under "input services" as they are directly or indirectly related to manufacture. The Tribunal found that the appellant did not avail credit on the setting up of buildings or roofs but on services like Erection, Commissioning, and Installation of machinery, which are eligible for credit.

Conclusion:
The Tribunal concluded that the disallowance of credit on the impugned services, except for Emergency Medical Services and services rendered by M/s. Lease Plan India Pvt. Ltd., cannot be sustained. The appeal was partly allowed, with disallowance upheld for Emergency Medical Services (Rs.31,518/-) and services by M/s. Lease Plan India Pvt. Ltd. (Rs.7664.99/-). The demand, interest, and penalties for other services were set aside.