2017 (12) TMI 151 - AT - Central Excise

CENVAT credit - input service - construction service - Alleging that after amendment to definition of Input Service with effect from 01.4.2011 construction service, being placed on the exclusion clause, therefore credit availed by the appellant is irregular - Held that - After amendment to the definition of the input service, a clarification issued by the Board vide Circular No 943/4/2011-CX dt 29.4.2011 dt 29.4.2011 where-under regarding credit of service tax paid on construction service as an input service used in modernization, renovation or repair, it has been clarified that the said services being provided in the inclusive part of definition of input service are definitely eligible to credit. A harmonious reading of the inclusive part of the definition and the exclusion clause mentioned at clause (a) relating to construction service of the definition of input service, it is clear that the construction service relating to modernization, renovation and repair of the factory continued to be within the meaning of input service and accordingly, the Service Tax paid on such service is eligible to credit. Appeal allowed - decided in favor of appellant.

Summary

Issues:
Whether the appellants are eligible for credit of Service Tax paid on construction service relating to modernization/renovation of their factory.

Analysis:
The appeal was filed against an order passed by the Commissioner of Central Excise, Customs, and Service Tax (Appeals) regarding the eligibility of the appellants to avail Cenvat credit for Service Tax paid on construction services. The dispute arose due to an amendment in the definition of input service from 01.4.2011, which excluded construction services. The appellant contended that while new construction might be excluded, modernization, renovation, and repair of existing plant and machinery within the factory premises should still be considered eligible for credit. The appellant referred to a circular issued by the Board to support their argument.

The Revenue argued that all construction services within the factory premises were excluded from the definition of input service post-amendment, making Service Tax paid on such services inadmissible for credit. The Revenue's stance was based on the exclusion clause added to the definition of input service. The Tribunal examined the relevant provisions before and after the amendment to the definition of input service. The Tribunal noted that services related to modernization, renovation, and repair of the factory were still considered input services, despite construction of buildings or civil structures being excluded.

The Tribunal highlighted a circular issued by the Board clarifying the eligibility of credit for Service Tax paid on construction services used for modernization, renovation, or repair. The Tribunal concluded that construction services related to modernization, renovation, and repair of the factory were within the ambit of input service, and therefore, the Service Tax paid on such services was eligible for credit. As the appellant had undertaken modernization and renovation work to comply with USA FDA guidelines, the Tribunal allowed the appeal, setting aside the previous order and granting consequential relief as per the law.

In summary, the Tribunal held that the appellants were indeed eligible for credit of Service Tax paid on construction services for modernization and renovation of their factory, based on a harmonious reading of the relevant provisions and the clarification provided by the Board.