2017 (10) TMI 27 - AT - Service Tax

CENVAT credit - appellants procured various inputs and input services for fabricating/manufacturing of structures like vessels and barges etc. which were subsequently used by them for rendering the taxable output services - It is the case of the Revenue in the show-cause notice that such credit availed by the appellant is ineligible as these services and inputs are not used for rendering of taxable output services and utilisation of these amounts for discharging service tax liability is incorrect - Held that - the issue is no more resintegra as Hon ble High Court Andhra Pradesh in the case of Sai Sahmita Storages (P) Ltd 2011 (2) TMI 400 - ANDHRA PRADESH HIGH COURT were considering similar issue wherein the availment of CENVAT credit on TMT bars for construction of warehouses which were used for rendering storage and warehousing services was contested by the Revenue and it was held that assessee used cement and TMT bar for providing storage facility without which storage and warehousing services could not have been provided and credit allowed - appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Eligibility of CENVAT credit on inputs and input services used for fabricating structures like vessels and barges for rendering taxable output services.

Analysis:
The issue in this case revolves around the eligibility of CENVAT credit on inputs and input services utilized by a service provider for fabricating structures like vessels and barges, which are subsequently used for rendering taxable output services. The appellant availed CENVAT credit of central excise duty and service tax paid on such inputs and services. The Revenue contended that the credit availed was ineligible as these inputs were not directly used for rendering taxable output services. The adjudicating authority confirmed the demands for ineligible credit availed, along with interest and penalties. However, the demand for service tax paid to the CENVAT account was dropped. The appellant challenged the confirmation of demand for ineligible credit, interest, and penalties imposed.

The appellant argued that the inputs and input services were indeed used for fabricating structures that were further utilized for providing output services. The appellant relied on judicial decisions such as the Hon'ble High Court of A.P. and Tribunal decisions to support their contention. The Revenue, on the other hand, argued that the chain of availing CENVAT credit ends once the structures are fabricated, and availing credit for rendering output services is incorrect.

After considering the submissions from both sides, the Tribunal found merit in the appellant's case. It was established that the appellant discharged appropriate service tax on the output services, utilizing the fabricated structures like barges. The Tribunal noted that the law allows CENVAT credit on inputs and input services when they are used for rendering output services, as established by judicial precedents. The Tribunal referenced cases where CENVAT credit was allowed on inputs used for construction of properties and setting up infrastructure for providing taxable services. The Tribunal emphasized that without the fabricated structures, the appellant would not be able to render the output services, justifying the eligibility of CENVAT credit on inputs and input services.

Based on the authoritative judicial pronouncements and precedents cited, the Tribunal held that the impugned order confirming the ineligibility of CENVAT credit was not sustainable. Therefore, the Tribunal set aside the impugned order and allowed the appeal in favor of the appellant.