2021 (2) TMI 457 - AT - Service Tax

CENVAT Credit - input services - credit of the service tax charged on the input service was taken by the Appellant, for purposes of adjusting the same against its output service tax liability on the provision of transportation of gas through pipeline - Whether the Tribunal committed an error in entertaining the ground of the respondent M/s. GSPL on such question of CENVAT credit in a Rectification Application and whether the Tribunal can be stated to have corrected the error apparent on the face of record? - HELD THAT - The appellants are engaged in the business of transporting gas through pipe line. For the purpose of transporting gas through pipe line it is essential for them to lay pipe lines between their different station. For the purpose of laying pipeline the appellants engage various contractors to procure pipes and completed the activity of laying the pipeline. In this process these contractors get the price of material used by them and all the services provided by them. These contractors pay service tax on the services provided by them to the appellant. These contractors take services from various sub contractor. The issue before us is if the appellants are entitled to take the credit of service tax paid by these contractors directly supplying services to the appellant for the purpose of laying pipeline. The fundamental objection of the revenue is that pipelines are immovable property and not goods and therefore, any service tax paid on such installation cannot be claimed as input credit by the appellant. It is seen that the issue involved in the instant case is squarely covered by the decision of tribunal in the appellant s own case GUJARAT STATE PETRONET LTD. VERSUS COMMR. OF C. EX. S.T., AHMEDABAD 2013 (9) TMI 1171 - CESTAT AHMEDABAD . The said decision was also approved by Hon ble High Court. The Learned Special Counsel for revenue has argued since the Hon ble Apex Court has issued notice, the decisions of tribunal and Hon ble High Court cannot be applied to the instant case - there are no force in this submission as the decision of Hon ble High Court has not been stayed. The second issue raised by the Learned Special Counsel is that tribunal solely relied on the decision of AP High Court in the case of COMMR. OF C. EX., VISAKHAPATNAM-II VERSUS SAI SAHMITA STORAGES (P) LTD. 2011 (2) TMI 400 - ANDHRA PRADESH HIGH COURT , and that the decision in the case of Sai Samhita Storages Pvt Ltd relates to inputs and not inputs services - We do not find any merit in argument of Learned Special Counsel. The decision of tribunal upheld by Hon ble High Court in Appellant s own case is comprehensive in all respects. In view of the fact that the decision in the case of Sai Samhita Storages Pvt Ltd was examined by the co-ordinate bench of tribunal and the said decision has been approved by the Hon ble High Court. There are no merit in the impugned order - appeal allowed - decided in favor of appellant.

Summary

Issues Involved:
1. Eligibility of Cenvat Credit on Service Tax paid by EPC contractors for pipeline construction.
2. Demand of interest and imposition of penalty on the appellant.

Detailed Analysis:

1. Eligibility of Cenvat Credit on Service Tax paid by EPC contractors for pipeline construction:

The appellant, engaged in transporting gas through pipelines, claimed Cenvat Credit on Service Tax paid to EPC contractors for pipeline construction, treating these as "input services." The appellant argued that these services are integral to providing their output service of gas transportation. The appellant cited prior Tribunal decisions in their favor, including their own case for the period June 2005 to March 2009, and other related cases, asserting that the principle of these judgments should apply here.

The appellant emphasized that the services received from EPC contractors are covered under the definition of 'input services' as they are used for providing the output service of gas transportation. They argued that without the pipelines, they could not render their output service, and thus, these services have a direct nexus with their business activities. The appellant also pointed out that the Adjudicating Authority's reliance on the Mundra Port case was misplaced as it was overturned by the Gujarat High Court and dealt with 'inputs' rather than 'input services.'

On the contrary, the Revenue argued that the pipeline system, being immovable property, does not qualify as 'goods' or 'services,' and thus, the Service Tax paid on its construction is not eligible for Cenvat Credit. They contended that the services provided by EPC contractors do not fall within the inclusive part of the definition of 'input services' as they are not used for setting up the premises of the service provider.

The Tribunal, after considering the rival submissions, found that the issue had already been decided in the appellant's favor in a previous order (2013 (32) STR 510 (Tri. Ahmedabad)), which was subsequently modified. The Tribunal held that the services provided by EPC contractors for pipeline construction are indeed covered under the definition of 'input services' as they are used for providing the output service of gas transportation. The Tribunal rejected the Revenue's argument that the pipeline system is immovable property and not eligible for Cenvat Credit.

The Tribunal also noted that the appellant's case was supported by the Andhra Pradesh High Court decision in Sai Samhita Storages (P) Ltd., which allowed credit for inputs used in constructing a warehouse. The Tribunal concluded that the appellant is entitled to Cenvat Credit for services received directly from contractors for laying the pipeline.

2. Demand of interest and imposition of penalty on the appellant:

The Tribunal did not find any merit in the impugned order demanding interest and imposing a penalty on the appellant. The Tribunal relied on its previous decision in the appellant's case, which had been approved by the Gujarat High Court. Since the High Court's decision had not been stayed, the Tribunal found no basis for the Revenue's arguments and allowed the appeal in favor of the appellant.

Conclusion:

In conclusion, the Tribunal allowed the appeal, holding that the appellant is entitled to Cenvat Credit for the Service Tax paid on services received from EPC contractors for pipeline construction. The demand of interest and imposition of penalty were also set aside.