2013 (11) TMI 959 - AT - Service Tax

Cenvat credit on Construction Service for setting up of factory - Whether Service tax on setting up of immovable property is a service and goods can be taken as inputs on which credit can be taken Held that - The inclusive portion of the definition of input services covers services used in relation to setting up, modernization, renovation or repairs of a factory, or premises of provider of output service or an office attached to such factory or premises - Thus the service use in relation to setting up of factory was specifically covered by the definition of input service under Rule 2(l) of Cenvat Credit Rules Relying upon Suzuki Motorcycle (I) Pvt. Ltd. Vs. Commissioner of Central Excise, Delhi 2011 (2) TMI 56 - CESTAT NEW DELHI . In Board s Circular dt. 04.01.08, there is a clarification with regard to availing the construction service or commercial or industrial construction service in respect of immovable property which had been rented out and the clarification appear to be on the point as to whether for payment of service tax in respect of renting of the immovable property, the Cenvat Credit of the service tax paid on construction service can be availed - This clarification would not be applicable when construction service has been availed for setting up of factory for manufacture of excisable goods which during the period, of dispute was specifically covered by the definition of input service as given in Rule 2(l) of the Cenvat Credit Rules Decided in favour of Assessee.

Summary

Issues:
1. Denial of Cenvat Credit for construction services availed for setting up the factory.
2. Adjudication of Show Cause Notice and imposition of penalty.
3. Interpretation of the definition of "input service" under Cenvat Credit Rules, 2004.
4. Applicability of Board's Circular dated 04.01.08 on availing construction services for setting up a factory.

Analysis:
1. The appellant, engaged in manufacturing, availed construction services for setting up their factory during 2006-2008 and claimed Cenvat Credit of Rs. 8,02,244. The Department issued a Show Cause Notice based on a Board's Circular denying the credit, leading to confirmation of demand, interest, and penalty by the Additional Commissioner. The Commissioner (Appeals) upheld this decision, prompting the appeal.

2. The appellant failed to appear for the hearing, resulting in an ex-parte decision as per Rule 2 of the CESTAT Procedural Rules, 1982. The Department defended the denial of Cenvat Credit citing the Board's Circular, emphasizing the correctness of the decision.

3. The definition of "input service" during the disputed period included services related to setting up a factory. The Tribunal noted that services for setting up a factory were explicitly covered under this definition. The Board's Circular, focused on renting immovable property, was deemed inapplicable when construction services were availed for manufacturing excisable goods, as per the Tribunal's previous ruling in a similar case. Consequently, the impugned order denying Cenvat Credit was set aside, and the appeal was allowed.

4. The Tribunal's decision highlighted the specific inclusion of services related to setting up a factory under the definition of "input service," distinguishing it from the context addressed in the Board's Circular. This nuanced interpretation aligned with previous judicial precedents, emphasizing the eligibility of Cenvat Credit for construction services utilized in manufacturing activities.