2022 (8) TMI 468 - AT - Central Excise

CENVAT Credit - Works Contract Services - Input Services - Department took the view that the services provided by the contractors were in the nature of works contract services which, was excluded from the definition of input service under the Cenvat Credit Rules, 2004 - period from 01-04-2011 to July, 2015 - HELD THAT - The definition of nput service has an inclusion clause and an exclusion clause. The intention of the government could never have been to cover certain services in the inclusion part and at the same time cover them also in the exclusion clause. The cases cited by the learned advocate for the appellants support this view. The expression modernisation, renovation or repairs of a factory was appearing in the definition of input service both before and after 01.07.2012. It has not been denied by the department that the Coke Oven Project of the appellants was towards modernization and renovation of their existing plant/factory. In the case of RELIANCE INDUSTRIES LTD. VERSUS C.C.E. S.T. -RAJKOT 2022 (4) TMI 729 - CESTAT AHMEDABAD , the facts were similar to that of the present case where the party had undertaken modernization and expansion of their facility, where it was held that The service provider has classified the services under ECIS and not under Construction Service and paid service tax under the head of ECIS. The ECIS Service independently not covered under the exclusion clause therefore, for this reason also credit cannot be denied. There is a catena of case laws wherein, it was held that the classification of service cannot be disturbed or challenged at the end of service recipient particularly for denial of cenvat credit. Once the classification is finalized at the service provider end, the same cannot be altered at the service recipient end. The Appellants have correctly taken credit of service tax paid/borne in respect of all services which were used for the Coke Oven Project as part of the modernization/renovation plan of the existing plant/factory - Appeal allowed - decided in favor of appellant.

Issues Involved:
1. Classification of services as 'input service' under the Cenvat Credit Rules, 2004.
2. Applicability of the exclusion clause in the definition of 'input service.'
3. Interpretation of 'works contract service' and its exclusion from 'input service.'
4. Period of applicability of definitions and show cause notices.
5. Allegation of suppression of facts and invocation of extended time limit.

Detailed Analysis:

1. Classification of services as 'input service' under the Cenvat Credit Rules, 2004:
The core issue revolves around whether the services used by the Appellants for the modernization and renovation of their factory, specifically for the Coke Oven Project, qualify as 'input service' under the Cenvat Credit Rules, 2004. The Appellants argued that these services were for modernization, renovation, and repair of the factory, which are included in the definition of 'input service.' The Tribunal noted that the definition of 'input service' includes services used in relation to modernization, renovation, or repairs of a factory.

2. Applicability of the exclusion clause in the definition of 'input service':
The department contended that the services provided by the contractors were 'works contract services,' excluded from the definition of 'input service.' The Tribunal examined the exclusion clause, which excludes services used for construction of buildings or civil structures but not services for modernization, renovation, or repairs. The Tribunal found that the services procured by the Appellants were for fabrication, erection, installation, and commissioning of the Coke Oven Project, not covered by the exclusion clause.

3. Interpretation of 'works contract service' and its exclusion from 'input service':
The Tribunal analyzed the definition of 'works contract service' both before and after 01-07-2012. It was noted that the exclusion clause does not exclude 'works contract service' per se but only certain types of works contract services related to construction. The Tribunal emphasized that the services received by the Appellants were not for construction or execution of works contract for a building or civil structures but for modernization of the factory, which is included in the definition of 'input service.'

4. Period of applicability of definitions and show cause notices:
The Appellants argued that the show cause notices relied only on the definitions applicable from 01-07-2012, and not for the period before this date. The Tribunal agreed, stating that the demand for the period prior to 01-07-2012 was not sustainable as the Appellants were not put to notice with reference to the definitions applicable before 01-07-2012. The Tribunal found that the adjudicating authority had gone beyond the scope of the show cause notice by relying on definitions not included in the notices.

5. Allegation of suppression of facts and invocation of extended time limit:
The department alleged suppression of facts, claiming the Appellants did not inform them about taking credit on the impugned input services. The Tribunal found no requirement under the law to inform the department about the specific nature of the service on which credit was taken. The Tribunal also noted that this case involved interpretation of definitions, for which neither penalty was warranted nor could the extended time limit be invoked on grounds of suppression or willful misstatement.

Conclusion:
The Tribunal concluded that the services used by the Appellants for the Coke Oven Project were for modernization and renovation of their existing factory, qualifying as 'input service' under the Cenvat Credit Rules, 2004. The exclusion clause did not apply to these services. The Tribunal set aside the impugned order and allowed the appeal, affirming that the Appellants correctly took credit of service tax paid on the services used for the modernization/renovation plan of their plant/factory.

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