2017 (9) TMI 775 - AT - Central Excise

CENVAT credit - civil works for the construction of the factory premises - pest control services - Held that - as regards pest control services there cannot be any dispute as to availment of the CENVAT credit as the appellant is a manufacturer of organic chemicals and needs pest control in order adhere to Good Manufacturing Practices - there is no hesitation to hold that CENVAT credit availed of the service tax paid by the service provider of pest control services is eligible as credit. As regards the CENVAT credit availed on the service tax paid on civil works rendered for the construction of the factory, these civil works were rendered for construction of the factory from where the appellant is planning or was proposing to manufacture and clear the goods on payment of appropriate duty - There is no dispute as to the fact that in this case, though works contracts was for setting up of a factory was entered prior to 01.03.2011 and partial work was completed, any service tax paid on the works contracts for setting up the factory the appellant till 01.03.2011 is eligible to avail the CENVAT credit - the CENVAT credit availed of the service tax paid on services rendered for construction of a factory post 01.04.2011 is to be held as not eligible. To that extent, the appellant is required to reverse CENVAT credit along with interest. Penalty - Held that - since major portion of the CENVAT credit is held to be eligible visiting the appellant with penalty for the small portion which is availed, without any intention to evade or to avail ineligible CENVAT credit, penalties imposed are set aside. Appeal allowed - decided partly in favor of appellant.

Summary

Issues involved:
Liability to avail CENVAT credit of service tax paid for civil works and pest control services.

Analysis:
The case involved a dispute over the eligibility of CENVAT credit for service tax paid during specific periods for civil works and pest control services. The judge, after hearing both sides, determined that the appellant, a manufacturer of organic chemicals, was eligible to avail CENVAT credit for the service tax paid on pest control services. This decision was based on the necessity of pest control for adhering to Good Manufacturing Practices. However, concerning the civil works for the construction of the factory premises, the judge referred to the CENVAT Credit Rules, 2004, which defined "input service" to include services used in relation to setting up a factory. The judge noted that any service tax paid on works contracts for setting up the factory before 01.03.2011 was eligible for CENVAT credit. However, post 01.04.2011, an amendment to the definition of input service excluded the term "setting up." Consequently, the judge ruled that the CENVAT credit availed on services rendered for factory construction post 01.04.2011 was not eligible, and the appellant was required to reverse the credit along with interest.

Regarding penalties, the judge considered that since a major portion of the CENVAT credit was deemed eligible, penalties imposed on the appellant for the small portion that was availed without any intention to evade or avail ineligible credit were set aside. Ultimately, the appeal was disposed of with the above decisions pronounced in open court on 30/08/17.