2018 (8) TMI 557 - AT - Service Tax

CENVAT Credit - various inputs - the inputs are used for construction of factory shed, building or lying of foundation or making of structures for support of capital goods etc used for providing outward service of Erection, Commissioning and Installation - N/N. 16/2009-CE (NT) 07.07.09 - Held that - The entire controversy revolves around the Notification No. 16/2009-CE (NT) 07.07.09 whereby in the definition of the inputs under explanation to the goods such as Cement, M S Angles, Channels, TMT bars, TMT Rods etc used for construction of factory shed building or laying of foundation or making of structures for support of capital goods were excluded. It is clear that this explanation is exclusively in respect of manufacturer for the reason that explanation was provided in respect of the goods such as Cement, Angles, MS Channels, TMT Bars & Rods etc only when it is used for construction of factory shed, building or laying of foundation or making of structure for support of capital goods. The use of factory shed is very clear that it is meant for manufacturer and not for service provider. Therefore, by taking inference form the aforesaid explanation credit in respect of the inputs which is undisputedly used for providing output service namely, Erection Commissioning Installation Credit cannot be denied. Appeal allowed - decided in favor of appellant.

Summary

Issues:
Whether the appellant is entitled to CENVAT Credit for inputs used in construction for providing outward services of Erection, Commissioning, and Installation.

Analysis:
The central issue in this case was whether the appellant could claim CENVAT Credit for inputs like Cement, MS Angels, TMT bars, etc., used in constructing factory sheds and buildings for providing outward services. The lower authorities had denied the credit, citing an amendment in Notification 16/2009-CE (NT) that excluded these goods from the definition of inputs during December 2009 to March 2011.

The appellant's representative argued that the exclusion under the notification applied only to manufacturers using the goods for construction purposes, whereas in this case, the inputs were directly used for providing output services. Therefore, the appellant contended that the credit should be allowed.

On the other hand, the Revenue representative supported the lower authorities' decision, stating that the goods in question were not covered under the definition of inputs post the amendment in Notification 16/2009-CE (NT) dated 07.07.09. Reference was made to a High Court judgment and a larger bench decision to support the denial of credit post the specified date.

Upon careful consideration, the Tribunal analyzed the amended explanation in Notification 16/2009-CE (NT) and noted that the exclusion of goods like Cement, MS Angels, TMT bars, etc., was specifically for manufacturers using them in construction activities. The Tribunal emphasized that the exclusion was not applicable to service providers using the inputs for output services like Erection, Commissioning, and Installation. Therefore, the Tribunal concluded that the denial of credit based on the notification was incorrect.

In the final judgment delivered on 09.07.2018, the Tribunal set aside the impugned order and allowed the appeal, ruling in favor of the appellant. The decision clarified that the exclusion under the notification did not apply to service providers utilizing the inputs for providing output services, thereby entitling the appellant to claim CENVAT Credit for the disputed inputs.