2018 (12) TMI 1477 - AT - Central Excise

CENVAT Credit - input services - construction services - alteration and extension of railway track - locomotive engine servicing charges - Held that - The issue involved in the present case is covered by the Division Bench decision of this Tribunal in the case of Jaypee Rewa Plant 2018 (9) TMI 633 - CESTAT NEW DELHI , where it was held that the railway track laid by the Appellant (which connects the railway siding outside the factory with the siding inside the factory) shall have to be treated to have satisfied the condition of used in the factory and credit is allowed. The impugned order denying the CENVAT credit on the railway sidings or alterations of sidings and extension of siding is not sustainable - appeal allowed - decided in favor of appellant.

Summary

Issues:
- Irregular availment of service tax credit on construction service
- Interpretation of exclusion clause A(a) of Rule 2(1) of CCR, 2004
- Nexus of services with manufacturing activity
- Barred by limitation
- Admissibility of CENVAT credit on railway track works

Analysis:
1. Irregular Availment of Service Tax Credit: The appellant, engaged in cement manufacturing, irregularly availed service tax credit on construction services not covered under the definition of input services. The issue arose when audit revealed irregular credit availed on alteration and extension of railway track and locomotive engine servicing charges. The appellant failed to inform the department about this irregularity, leading to a show-cause notice and subsequent confirmation of demand by the Additional Commissioner.

2. Interpretation of Exclusion Clause A(a): The appellant argued that the exclusion clause A(a) of Rule 2(1) does not cover alteration and extension of railway tracks as they are not building or civil structures. They contended that these services are essential for their manufacturing process, as the railway tracks facilitate the inward transportation and material handling system crucial for their operations. The appellant relied on various decisions supporting the admissibility of credit on similar services.

3. Nexus with Manufacturing Activity: The appellant asserted that the services for alteration, extension, and siding of railway tracks have a direct or indirect nexus with the manufacture of the final product. They emphasized the importance of these services in maintaining their material handling system, which impacts the manufacturing activity. The appellant cited relevant judgments to support their argument.

4. Barred by Limitation: The appellant contended that the demand raised for irregular CENVAT credit availed during a specific period was barred by limitation. They argued that there was no intent to evade duty payment, as the credit was reflected in statutory returns and the appellant believed the services were covered under the definition of input services. The issue involved interpretation of CENVAT Credit Rules, with the appellant citing relevant decisions in their favor.

5. Admissibility of CENVAT Credit on Railway Track Works: After considering submissions from both parties and relevant case law, the Tribunal found that the issue was covered by precedents. Citing the Division Bench decision in a similar case, the Tribunal held that the railway track laid by the appellant satisfied the condition of being "used in the factory." They also referred to judgments supporting the admissibility of CENVAT credit on railway track works, ultimately allowing the appeal and setting aside the impugned order.

In conclusion, the Tribunal ruled in favor of the appellant, allowing the appeal and overturning the decision of the Commissioner (A) regarding the irregular availment of CENVAT credit on construction services related to railway tracks. The judgment highlighted the importance of considering the nexus of services with manufacturing activities and interpreting exclusion clauses within the relevant rules.