2024 (5) TMI 618 - AT - Central Excise

CENVAT Credit of service tax paid - services used for repairs and renovation of the factory - period from December, 2015 to June, 2017 - HELD THAT - The Appellant had taken Cenvat credit on Civil Construction Work on account of maintenance repairs work of the factory which was done for smooth running of the plant. In view of the Board s Circular No.943/4/2011-CX dated 29.04.2011, it is found that the Cenvat credit involved in the dispute is related to the service tax paid on services used for repairs and renovation of the factory and as such is eligible as Cenvat credit. It is also found that the definition of input services as contained in Rule 2(l) specifically includes services used in relation to modernization, renovation or repairs of a factory. The said definition was amended w.e.f. 01.04.2011 wherein construction of the factory was excluded. As there is no exclusion in respect of the services relatable to renovation or repair, there are no reasons to hold that such services were not cenvatable. The impugned orders cannot be sustained are therefore set aside - Appeal allowed.

Summary

Issues:
The case involves the interpretation of the definition of "Input Service" under Rule 2(1)(A) of the Cenvat Credit Rules, 2004, and the eligibility of Cenvat credit on Civil Construction Work for maintenance and repairs of a factory.

Interpretation of "Input Service":
The Commissioner (Appeals) rejected the appeal based on the definition of "Input Service" under Rule 2(1)(A) of the Cenvat Credit Rules, 2004. The definition includes various services used in manufacturing processes but excludes services related to works contracts and construction services. The Commissioner observed that Civil Construction Work falls outside the purview of "Input Services" and disallowed the Cenvat credit taken by the Appellant on such services. The Commissioner also noted that the credit taken on specific services like "Making of Poultry House Structure" and "Poultry House Roof repairs" was not related to the manufactured product, further supporting the disallowance of the credit.

Applicability of Interest and Penalty:
Regarding the applicability of interest, the Commissioner found that since the wrongly taken credit was not utilized by the Appellant, no interest liability arose as per Rule 14 of the Cenvat Credit Rules, 2004. However, the Commissioner imposed a penalty under Rule 15(2) of the Cenvat Credit Rules, 2004, as the Appellant had previously reversed the credit but took it again willfully, contravening the rules.

Eligibility of Cenvat Credit on Repairs and Renovation:
The Tribunal, upon review, found that the Cenvat credit taken on Civil Construction Work for maintenance and repairs of the factory was eligible. Referring to a CBEC Circular, the Tribunal noted that services used for repair or renovation of a factory are allowed as input services. The Tribunal emphasized that the service tax paid on repairs and renovation work in the factory is covered by the circular and is eligible for Cenvat credit. Additionally, the Tribunal highlighted that the definition of input services specifically includes services used in relation to renovation or repairs of a factory, with no exclusion for such services post-amendment.

Conclusion:
In conclusion, the Tribunal set aside the impugned orders and allowed the appeal filed by the Appellant, granting consequential relief as per law. The Tribunal's decision was based on the eligibility of Cenvat credit on services related to repairs and renovation of the factory, in line with the CBEC Circular and the definition of input services under the Cenvat Credit Rules, 2004.