2023 (7) TMI 631 - AT - Central Excise

CENVAT Credit - works contract service or not - construction services provided by various contractors towards the construction of the civil structure or the part thereof for the appellants premises for making of structure of support of capital goods - SCN barred by time limitation or not - HELD THAT - The modernization, renovation or repairs of a factory are appearing in the inclusion part of the definition of input service. In the exclusion part such work contracts are covered where service element can be vivisected from the goods element and the properly in those goods gets transferred in favour of the recipient. There are no evidence on record produced by the Department to prove that the construction services for the building/civil structure was for a building other than the factory premises of the appellant. Also there is no evidence to prove that properly in goods got transferred to appellant - there are no hesitation to accept the submission of the appellant that they were receiving the construction services for the repair, maintenance and modernization of their premises. The specific disallowance of availment of Cenvat credit with respect to such construction/erection, installation and commission, services which are with respect to the new construction if undertaken by the assessee, however, there is no such specific disallowance in Rule 2 (i) of CCR, 2004 with respect to repair and maintenance work of the premises of the manufacturer. Time limitation - only allegation is that had the Department not conducted audit, the appellant would have succeeded to evade - HELD THAT - The said allegation has no basis to stand otherwise also, it is observed that the show cause notice was based on appellant s own documents i.e. the invoices as were maintained by them in accordance of business the returns were admittedly being filed in time mentioning required details about availment of credit. There is nothing on record which may be called as the proof for alleged suppression or mis-conduct. Resultantly the extended period of limitation has wrongly been invoked by the Department while issuing the impugned show cause notice. The order under challenge is also liable to be set aside for an apparent ambiguity in the show cause notice itself i.e. the authority issuing show cause notice itself was not sure as to whether the services are merely the construction services in their own building. Appellant has produced on record enough document in the form of several invoices that the services in the construction/erection, commissioning and installation services, but those were meant purely for maintenance/repair/ modernization of appellant s own premises - Appeal allowed.

Summary

Issues Involved:
1. Classification of services received by the appellant as works contract services.
2. Eligibility of Cenvat credit on construction services.
3. Invocation of the extended period of limitation for issuing the show cause notice.

Summary:

1. Classification of Services as Works Contract Services:
The Department alleged that the appellant availed Cenvat credit on service tax paid for construction services, which they classified as works contract services, making them ineligible for Cenvat credit under the Cenvat Credit Rules (CCR), 2004. The appellant argued that the services were related to the renovation, repairs, and modernization of their factory, which are included in the definition of input service under CCR, 2004. The adjudicating authorities had wrongly considered these services as works contract services, which fall under the exclusion clause of the definition of input service.

2. Eligibility of Cenvat Credit on Construction Services:
The appellant provided all relevant documents, including 293 invoices. The adjudicating authority dropped the demand for 58 invoices where the services were clearly mentioned as maintenance, management, or repair. However, for the remaining invoices, the nature of work was mentioned as erection, commissioning, or installation, and the Cenvat credit was disallowed. The appellant contended that these services were also for the modernization of their premises. The Tribunal observed that the services related to modernization, renovation, or repairs of a factory are included in the definition of input service. The Tribunal found no evidence that the construction services were for buildings other than the factory premises or that the property in goods was transferred to the appellant. Therefore, the services were for the repair, maintenance, and modernization of their premises, making them eligible for Cenvat credit.

3. Invocation of Extended Period of Limitation:
The appellant argued that the show cause notice was issued after more than two years, and they had been regularly filing their returns with all requisite details, which were never objected to by the Department. The Tribunal observed that there was no evidence of willful suppression by the appellant. The show cause notice was based on the appellant's own documents, and the returns were filed in time with the required details about the availment of credit. The Tribunal held that the extended period of limitation was wrongly invoked by the Department.

Conclusion:
The Tribunal set aside the order under challenge, holding that the services availed by the appellant were for the repair, maintenance, and modernization of their premises, making them eligible for Cenvat credit. The show cause notice was also found to be barred by time due to the lack of evidence of willful suppression by the appellant. Consequently, the appeal was allowed.