2015 (5) TMI 663 - HC - Service Tax

Denial of CENVAT Credit - cement and steel - Whether on the facts and in the circumstances of the case, the Tribunal was justified in law in rejecting the claim of the assessee in light of the provisions of Rule 2(k) of the Cenvat Credit Rules, 2004 - Held that - jetty was constructed and input credit was claimed on cement and steel. The definition of Rule 2(k) was applicable and Explanation 2 did not provide that cement and steel would not be eligible for input credit. - The appellant is neither having any factory nor he is manufacturer. The appellant is a service provider of port - plain reading of the definition of Rule 2(k) would demonstrate that all the goods used in relation to manufacturer of final product or for any other purpose used by a provider of taxable service for providing an output service are eligible for CENVAT credit. It is not in dispute that the appellant is a taxable service provider on port under the category of port services. Therefore, the appellant was entitled for input credit and the decision of the Division Bench of the Andhra Pradesh High Court 2011 (2) TMI 400 - ANDHRA PRADESH HIGH COURT squarely applies to the facts of the case - Decided in favour of assessee.

Summary

Issues:
1. Interpretation of Rule 2(k) of the Cenvat Credit Rules, 2004 regarding eligibility of input credit for construction materials.
2. Applicability of input credit for a service provider constructing a jetty within a port area.
3. Impact of clarificatory amendments on input credit eligibility.
4. Consideration of exemption status of construction service on input credit eligibility.

Issue 1: Interpretation of Rule 2(k) of the Cenvat Credit Rules, 2004
The case involved a Tax Appeal challenging the denial of input credit on cement and steel used in the construction of a jetty by a service provider. The appellant contended that as a service provider, they were entitled to input credit under Rule 2(k) as the construction materials qualified as "inputs" under the Cenvat Credit Rules. The appellant relied on a judgment from the Andhra Pradesh High Court, emphasizing that all goods used by a taxable service provider for providing an output service are eligible for CENVAT credit. The court agreed with the appellant's interpretation of the rule and held that the appellant, as a service provider, was entitled to claim input credit for the construction materials used in the jetty.

Issue 2: Applicability of input credit for a service provider constructing a jetty within a port area
The court addressed the argument raised by the revenue that since the construction of the jetty was exempted, input credit should not be available to the appellant. However, the court rejected this argument, stating that the appellant, by purchasing and providing materials for the construction of the jetty, was entitled to claim input credit. The court emphasized that the method of construction, whether through a contractor or by providing materials directly, did not affect the appellant's eligibility for input credit as a service provider within a port area.

Issue 3: Impact of clarificatory amendments on input credit eligibility
The court analyzed the clarificatory amendments made to the Cenvat Credit Rules in 2009 and concluded that the amendments did not restrict the appellant's entitlement to input credit. The court noted that the amendments did not specify that cement and steel were ineligible for input credit for service providers. Therefore, the court held that the appellant's claim for input credit on construction materials was valid both before and after the clarificatory amendments, as the appellant's status as a service provider was not affected by the changes in the rules.

Issue 4: Consideration of exemption status of construction service on input credit eligibility
The court rejected the argument that the exemption status of the construction service rendered the appellant ineligible for input credit. The court clarified that the appellant's provision of materials for the construction of the jetty, irrespective of the construction service's exemption status, qualified them to claim input credit. The court overturned the Tribunal's decision and ruled in favor of the appellant, allowing them to avail input credit on the construction materials used in the jetty. No costs were awarded in the judgment.

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