2023 (11) TMI 719 - AT - Central Excise

CENVAT Credit - input service - services availed by the appellant with respect to renovation, repairs and modernizations of its plant and machinery - case of the department is that the said services relate to industrial and commercial construction services/work contract services pertaining to civil works and would not be input services as defined under rule 2(1) of the CENVAT Credit Rules, 2004 - HELD THAT - It would be seen from the definition of input service in rule 2(l) of the Rules that while the means part of the definition has continued to remain the same pre amendment or post amendment, but the includes part and the excludes part of the definition of input service have underdone changes. Though services used in relation to setting up of a factory was included in the inclusive part of the definition of input services prior to 01.04.2011 but it was deleted w.e.f. 01.04.2011. The excludes part in the definition of input service was added w.e.f. 01.04.2011 and it provided that services specified in certain sub-clauses of clause (105) of section 65 of the Finance Act in so far as they were used for construction of a building or a civil structure or a part thereof would be excluded w.e.f. 01.04.2011. It is also seen that the excludes part of the definition of input service was further amended w.e.f. 01.07.2012. When input service under rule 2(l) includes any service used in relation to modernization, renovation or repairs of factory either prior to 01.04.2011 or from 01.04.2011 upto 30.06.2012 or w.e.f 01.07.2012, the appellant would be entitled to avail CENVAT credit of the input service received in relation to renovation or repairs of factory and merely because w.e.f. 01.04.2011 the construction of a building or a civil structure or a part thereof has been excluded from the definition of input service would not mean that any service used in relation to renovation or repairs of factory would stand excluded from the definition of input service. The exclusion part would cover constructions at the time of setting up of the plant and would not include the repairs or renovation works. This issue stands decided in favour of the appellant by the Tribunal in M/s. Jai Balaji Industries Ltd. vs. Commissioner of Central Excise, Customs Service Tax, Durgapur 2022 (8) TMI 468 - CESTAT KOLKATA where it was held that the Appellants have correctly taken credit of service tax paid/borne in respect of all services which were used for the Coke Oven Project as part of the modernization/renovation plan of the existing plant/factory. In view of the decision of the Tribunal rendered in Jai Balaji Industries, the order passed by the Commissioner (Appeals) denying the CENVAT credit to the appellant merely for the reason that though the services that had been rendered were renovation or repair services which the appellant had received would be covered by the includes part of the definition but the appellant cannot avail CENVAT credit because of the exclusion clause cannot be sustained. The order dated 26.08.2020 passed by the Commissioner (Appeals) is, accordingly, set aside - appeal allowed.

Summary

Issues Involved:
1. Eligibility of CENVAT credit for services related to renovation, repairs, and modernization of plant and machinery.
2. Application of the exclusion clause in the definition of 'input service' under the CENVAT Credit Rules.
3. Invocation of the extended period of limitation under section 11A(4) of the Central Excise Act, 1944.

Summary:

Eligibility of CENVAT Credit:
The appellant, M/s. Godawari Power & Ispat Limited, contested the denial of CENVAT credit on services availed for renovation, repairs, and modernization of its plant and machinery. The department argued that these services were related to civil works and thus excluded from the definition of 'input services' under rule 2(l) of the CENVAT Credit Rules, 2004.

Application of Exclusion Clause:
The adjudicating authority initially examined the transactions and allowed a substantial portion of the credit, disallowing only a smaller portion. The Commissioner (Appeals) reversed this decision, disallowing the entire credit on the grounds that the services were related to civil construction work, which is excluded from the definition of 'input services' post-01.04.2011.

Extended Period of Limitation:
The appellant argued that the extended period of limitation under section 11A(4) of the Central Excise Act, 1944, could not be invoked. However, the learned authorized representative for the department contended that the scope of remand was limited to verifying the work orders and actual use of services, thus justifying the invocation of the extended period.

Judgment:
The Tribunal analyzed the definition of 'input service' under rule 2(l) of the CENVAT Credit Rules as it stood prior to 01.04.2011, from 01.04.2011 to 30.06.2012, and w.e.f. 01.07.2012. It was observed that while the 'means' part of the definition remained unchanged, the 'includes' and 'excludes' parts underwent changes. The Tribunal emphasized that services used for modernization, renovation, or repairs of a factory are included in the definition of 'input service' and that the exclusion clause pertains to services used for the initial setting up of the factory.

The Tribunal referred to the decision in M/s. Jai Balaji Industries Ltd. vs. Commissioner of Central Excise, Customs & Service Tax, Durgapur, which clarified that services related to modernization, renovation, or repairs of an existing factory are admissible as 'input services' and not covered by the exclusion clause.

Conclusion:
The Tribunal set aside the order of the Commissioner (Appeals) and allowed the appeal, concluding that the appellant is entitled to avail CENVAT credit for services related to the renovation, repairs, and modernization of its plant and machinery. The exclusion clause does not apply to these services as they are not related to the initial construction or setting up of the factory.