2017 (7) TMI 383 - AT - Service Tax

CENVAT credit - input - case of the department is that since appellant in respect of their construction services availed exemption N/N. 1/2006-ST they are not entitled for the CENVAT credit on the input used in the manufacture of Aluminium doors and windows - Held that - the appellant are carrying out two different activities one is manufacture and other is construction services both have to be dealt with separately for all the purposes. As regard the manufacture activity appellant has complied with all the rules and regulation procedure such as input was received on which credit was taken the said input was used in the manufacture of doors and windows and it is cleared on the payment of duty - Cenvat credit availed on such inputs is clearly admissible. Even though if there is violation in respect of construction service the Cenvat credit which relates to manufacturing activity cannot be disputed. - appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Entitlement to Cenvat credit on input used in the manufacture of Aluminium goods.
2. Impact of availing exemption notification on Cenvat credit eligibility.
3. Distinction between manufacturing activity and construction services for Cenvat credit.

Analysis:
1. The appellant, engaged in manufacturing Aluminium goods and providing construction services, availed Cenvat credit on inputs used for manufacturing doors and windows. The department contended that since the appellant claimed exemption under notification no. 1/2006-ST for construction services, they were not entitled to Cenvat credit for inputs used in manufacturing.

2. The appellant argued that they were involved in distinct activities of manufacturing and construction services, each requiring separate treatment. They maintained that the Cenvat credit availed on inputs used for manufacturing doors and windows, cleared after payment of duty, was legitimate and could not be questioned based on the exemption claimed for construction services.

3. Upon review, the Tribunal found that the appellant's manufacturing and construction activities were separate and should be considered independently. The appellant had followed all regulations for manufacturing, including using inputs for doors and windows, which were duly cleared after duty payment. The Tribunal concluded that even if there were issues with the construction services, the Cenvat credit related to manufacturing activities should not be denied. The previous orders denying Cenvat credit were deemed unsustainable due to lack of proper consideration, leading to the allowance of the appeal with appropriate relief as per the law.

This judgment clarifies the distinction between different business activities for Cenvat credit eligibility and emphasizes the importance of treating manufacturing and service provisions separately for tax purposes.