2014 (6) TMI 204 - AT - Service Tax

Waiver of pre deposit - CENVAT Credit - commercial/industrial construction services - Held that - Definition of inputs service underwent a change on 1-3-2011 and because of the change, assessee became ineligible for Cenvat credit of Service Tax paid on input services used in relation to setting up of a factory which was available prior to 1-3-2011. The appellant had undertaken expansion of their cement plant and it was submitted that modernization, renovation or repair of the factory is covered and the activity undertaken by them is nothing but modernization of the factory. However, on going through the definition, we find that in clause A of the definition of input service it has been specifically provided that the credit would not be available when the services are used for construction of a building or a civil structure or a part thereof. Prima facie, the appellants have taken credit on the services used for construction of the factory and therefore, the appellant is required to be put to terms to this extent at least. It has been submitted that the total amount payable within the normal period of limitation would come to about Rs. 6,00,000/-. The appellants are directed to deposit an amount of Rs. 6,00,000 within six weeks - Conditional stay granted.

Summary

Issues:
- Denial of Cenvat credit on Service Tax paid for construction services
- Applicability of amendment to definition of input service
- Sustainability of demand for the period prior to the amendment

Analysis:
The judgment by the Appellate Tribunal CESTAT BANGALORE pertains to the denial of Cenvat credit on Service Tax paid for commercial/industrial construction services used for the expansion of a Cement Plant by the appellant from 1-4-2007 to 31-1-2012. The appellant contested the denial of credit based on an amendment to the definition of input service effective from 1-3-2011, which removed the words "setting up" from the inclusive part of the definition. The appellant argued that this retrospective amendment was clarificatory and not sustainable as a ground for confirming the demand. Additionally, the appellant contended that the demand for the period before 1-3-2011 was also not sustainable.

Upon review, the Tribunal acknowledged the change in the definition of input service on 1-3-2011, rendering the assessee ineligible for Cenvat credit on Service Tax paid for services related to setting up a factory, which was permissible before the amendment. The appellant had undertaken the expansion of their cement plant, claiming it to be modernization of the factory. However, the Tribunal noted that the definition of input service explicitly excluded credit for services used in the construction of a building or civil structure. Consequently, the Tribunal found that the appellant had indeed taken credit for services used in constructing the factory, necessitating the appellant to deposit Rs. 6,00,000 within six weeks and report compliance.

In conclusion, the Tribunal upheld the denial of Cenvat credit for construction services used for the factory expansion, citing the specific exclusion in the definition of input service. The appellant was directed to make a deposit and comply with the order, with recovery stayed during the appeal's pendency. This judgment clarifies the application of the amended definition of input service and its impact on Cenvat credit eligibility for construction-related services.