2016 (8) TMI 618 - AT - Central Excise

Cenvat credit - sleepers, RLS Rails used for construction of railway sidings, which were further used for providing the services - Held that - in the light of the declaration of law by the Gujarat High Court in the case of Mudra Ports & Special Economic Zone Limited vs. CCE & Cus. 2015 (5) TMI 663 - GUJARAT HIGH COURT , such use of various inputs that is railway material for the construction of railway siding has to be held as cenvatable inputs. As such, we are of of the view that no error is found in the order passed by the Commissioner while allowing the cenvat credit. - Decided against the Revenue

Summary

Issues:
1. Appeal against the order passed by the Commissioner regarding denial of cenvat credit.
2. Dispute over the eligibility of cenvat credit for inputs used in the construction of railway sidings for providing services.
3. Interpretation of the definition of "input" and "capital goods" in the context of cenvat credit.

Analysis:
The appeal was filed by the Revenue against the order of the Commissioner, where the issue revolved around the denial of cenvat credit to the respondent engaged in providing Cargo Handling Services. The Commissioner had allowed the credit in respect of sleepers and RLS Rails used by the respondent for constructing railway sidings, which were further utilized for service provision. The Revenue contended that the use of these inputs in railway sidings did not directly or indirectly relate to the output service provided by the assessee and did not fall under the definition of "input."

In response, the advocate for the respondent cited precedents, including a Tribunal decision and a High Court ruling, supporting the cenvatability of services availed for the construction of railway sidings. The advocate highlighted that the railway track material used for transporting coal to the factory premises was considered capital goods in a specific case. Additionally, reference was made to a recent decision by the Gujarat High Court where the court held that materials used in the construction of structures vital for providing output services were eligible for cenvat credit.

Upon considering the arguments and precedents, the Tribunal found the situation in the present case to be identical to the Gujarat High Court decision. The railway siding constructed by the appellant was essential for providing Cargo Handling services, and the use of various inputs for its construction was deemed cenvatable. Consequently, the Tribunal upheld the Commissioner's decision to allow the cenvat credit, concluding that no error was found in the order. As a result, the appeal by the Revenue was rejected.

Overall, the judgment clarified the interpretation of the definition of "input" and "capital goods" in the context of cenvat credit eligibility, emphasizing the importance of structures directly contributing to the provision of output services in determining credit availability.