2022 (11) TMI 1088 - AT - Central Excise

CENVAT Credit - inputs used in the manufacture of prefabricated structure - input services used in Construction of Building, Erection Commissioning Installation (Erection of Electric Tower From GEB to their factory premises) Architect Services, Real Estate Agent - denial of credit on the ground of no nexus with manufacture of finished goods - period February 2008 to June 2009 - HELD THAT - This appeal pertains to the period February 2008 to June 2009, the adjudicating authority decided the matter on the basis of old theory of law that services are related to the immovable properties hence Cenvat credit is not admissible. We find that subsequently, the various high courts and tribunals have given decisions in various judgments cited by the learned counsel for the appellant on this issue. The entire finding of the adjudicating authority is based on old theory of law and subsequently, much water was flown on the issue. We are of the view that the adjudicating authority needs to give a fresh look in the entire case in the light of the various judgements given subsequent to the passing of the impugned order. The adjudication authority in respect of most of the services denied the credit on the ground that there is no nexus between the services with the manufacturing activity of appellant and clearance of the goods or for their business activity. We find that all the services per se are prima facie input services held in various judgments, however, the admissibility of Cenvat credit on these services can be decided on the basis that whether the services were used for the purpose specified in the definition of input service. Appeal allowed by way of remand.

Summary

Issues:
Admissibility of Cenvat credit on input services used in construction activities for setting up a factory.

Analysis:
The appeal was filed by M/s. Kohler India Corporation Pvt. Ltd. against the Order-in-Original passed by the Commissioner of Customs, Central Excise, and Service Tax, Surat. The revenue authorities observed that the Cenvat Credit on inputs used in the manufacture of prefabricated structure and input services for construction activities like building, erection, commissioning, and installation were inadmissible as they were not directly or indirectly related to the manufacture of finished goods. The adjudicating authority confirmed the demand of ineligible Cenvat credit along with interest and penalty. The appellant contended that the services used for setting up or modernizing the factory were eligible for Cenvat Credit as per the definition of input services under the Cenvat Credit Rules, 2004. They cited relevant case laws to support their argument.

The appellant further argued that the circular relied upon to deny Cenvat credit based on the creation of immovable property was legally incorrect. They emphasized that the definition of input services at the relevant time included activities related to business, making them eligible for Cenvat Credit. The appellant also disputed the denial of credit based on the service providers' classification of services, asserting that the appellant received services in the specified taxable categories and should not be penalized for the service providers' actions. The appellant cited relevant judgments to support their contentions.

The Revenue, represented by the Authorized Representative, supported the reasoning of the adjudicating authority for denying the credit. They cited various decisions to reinforce their stance. However, the Tribunal noted that the adjudicating authority's decision was based on an outdated legal theory regarding services related to immovable properties. The Tribunal acknowledged the subsequent judgments by high courts and tribunals that favored the appellant's position. The Tribunal concluded that a fresh review of the case was necessary in light of the evolving legal interpretations and set aside the impugned order, remanding the matter back to the adjudicating authority for a fresh decision.

In conclusion, the Tribunal found that the denial of Cenvat credit on input services used in construction activities for setting up a factory required reevaluation in accordance with the updated legal interpretations. The matter was remanded to the adjudicating authority for a fresh decision based on the evolving jurisprudence on the admissibility of Cenvat credit in such cases.