2021 (10) TMI 383 - AT - Central Excise

CENVAT Credit - input services - services availed for setting up of Coal Handling Plant - Coal Handing Plant (CHP) has been set up by the appellant for evacuation of coal from its mining premises - period from June 2013 to November 2015 - HELD THAT - The purpose of setting up of the CHP is to load the coal into the railway wagons in an automated manner after the coal is crushed into the desired size. It is not in dispute that the services used by the appellant is for modernisation of the coal loading process. The definition of input service specifically include services received by a manufacturer for modernisation of a factory. On perusal of decision of the Tribunal in the case of Pepsico India Holdings (P) Ltd 2021 (7) TMI 1094 - CESTAT HYDERABAD relied upon by the appellant, the Tribunal has observed that without setting up of the factory, there cannot be any manufacture and the mere fact that the words setting up of factory has not been retained in the definition of input services post 01.04.2011, the same will not mean that the benefit of credit has been taken away by the legislature. The services used for setting up of the factory even after 01.04.2011 would be eligible for credit. The Ld. Commissioner has allowed credit on certain invoices assuming the same to be pure services and disallowed the credit on remaining portion by considering the same to be in the nature of civil portion. We find that this Tribunal has been consistently applying the user test to decide the credit eligibility as laid down by the Hon ble Supreme Court. The Tribunal in B S Sponge Pvt Ltd vs. CCE, Raipur 2019 (2) TMI 850 - CESTAT NEW DELHI . Also, the mode of valuation adopted by the Contractor to discharge service tax on 40% of the contract value is in accordance with law contained in Service Tax Valuation Rules and cannot be disputed while deciding credit eligibility at the appellant s end. When service tax has been levied only on 40% of the total value, it essentially means that service tax has been paid only on the service portion. CENVAT Credit availed by the appellant for setting up of CHP, which is used for evacuation of coal by rapid loading process, cannot be legally denied - appeal allowed - decided in favor of appellant.

Summary

Issues Involved:
1. Denial of Cenvat Credit on services for setting up of Coal Handling Plant (CHP).
2. Imposition of penalty and applicable interest.
3. Invocation of extended period of limitation.

Detailed Analysis:

1. Denial of Cenvat Credit on services for setting up of Coal Handling Plant (CHP):
The appellant, a subsidiary of Coal India Limited, engaged in mining and selling coal, availed Cenvat credit on services used for setting up a Coal Handling Plant (CHP) for modernizing the coal loading process. The Ld. Commissioner denied the credit, arguing that the contract was predominantly for construction of structural works, which falls under the exclusion clause of input service. The appellant contended that the contract was a turnkey project involving planning, designing, engineering, construction, fabrication, supply, erection, trial run, commissioning, and testing of the CHP, not merely civil works. They argued that the essence of the contract was to modernize the coal loading process, which is eligible for credit under the definition of input service. The Tribunal noted that the services used for setting up the CHP were for modernizing the coal loading process, which is specifically included in the definition of input service. The Tribunal also referred to the decision in Pepsico India Holdings (P) Ltd, which held that services used for setting up a factory are eligible for credit even after the definition change post 01.04.2011. The Tribunal applied the "user test" principle, concluding that the services used for setting up the CHP are eligible for Cenvat credit.

2. Imposition of penalty and applicable interest:
The appellant contested the imposition of penalty and interest, arguing that there was no fraud or suppression involved. The Tribunal did not find any specific discussion on this issue in the judgment, but the setting aside of the demand order implies that the penalties and interest related to the denied credit were also invalidated.

3. Invocation of extended period of limitation:
The appellant also contested the invocation of the extended period of limitation. The Tribunal's decision to set aside the demand order suggests that the extended period of limitation was not justified in this case.

Conclusion:
The Tribunal allowed the appeal, setting aside the impugned demand order and granting consequential relief to the appellant. The Tribunal held that the services used for setting up the CHP for modernizing the coal loading process are eligible for Cenvat credit, and the mode of valuation adopted by the Contractor for discharging service tax on 40% of the contract value was in accordance with the law. The penalties and interest imposed were also invalidated as part of the judgment.