2023 (8) TMI 1317 - AT - Central Excise

CENVAT Credit - input services - construction and erection services in the factory - It is the contention of the Department that after the amendment to the definition of the input service, all construction services undertaken within the factory premises fall outside the scope of the said definition - HELD THAT - It is concluded that a harmonious reading of the inclusive part of the definition and the exclusion clause mentioned at clause (a) relating to construction service of the definition of input service , it is apparent that the construction service relating to modernization, renovation and repair of the factory continued to be within the meaning of input service and accordingly, the Service Tax paid on such service is eligible to credit. It is a fact that the appellant took credit on the services used in the construction of civil structure for newly setup of Steel Melting of Continuous Castings Machine (SMS), and for provision of fabrication and erection service for the installation of the SMS plant, which is covered under the definition modernization, renovation or repair . The Tribunal has consistently held that credit on such services is available to the taxpayer, which have been quoted by the learned counsel while making his arguments. The impugned order is set-aside and the appeal is allowed.

Summary

Issues involved:
The appeal challenges the denial of Cenvat credit under Rule 14 of the Cenvat Credit Rules, 2004, interest demand, and penalty imposition by the Department. The main issue is whether the appellants are eligible for the credit of service tax paid on construction and erection services in their factory.

Summary of Judgment:

Issue 1: Denial of Cenvat Credit and Penalty Imposition
The Department denied Cenvat credit of Rs. 2,10,808/- to the appellant for availing credit on ineligible input services during 2015-16 and 2016-17. The Department alleged that the input services were not covered under the definition of input service. The Order-in-Original disallowed the Cenvat credit, imposed interest, and a penalty equal to the credit amount. The Commissioner (Appeals) upheld the Order-in-Original. The appellant contended that the services were eligible for credit as they were used in repair and renovation of the factory premises. The Tribunal noted that post-amendment, services used in modernization, renovation, or repair of the factory fall within the definition of 'input service'. The Board's circular clarified that service tax paid on such construction services is eligible for credit. The Tribunal cited precedents supporting credit eligibility for such services. Consequently, the impugned order was set aside, and the appeal was allowed.

Issue 2: Eligibility of Credit on Erection Services
The appellant also availed credit on fabrication and erection services for the SMS plant. The Department argued that construction services were specifically excluded from the definition of input service. However, the appellant contended that the services were directly connected to the production activity and were not specified services in the exclusion clause. The Tribunal observed that services related to modernization, renovation, or repair of the factory were eligible for credit post-amendment. The Tribunal referenced relevant precedents to support the appellant's claim. As a result, the impugned order was set aside, and the appeal was allowed.

Separate Judgment:
The Hon'ble Ms. Hemambika R. Priya, Member (Technical) delivered the judgment setting aside the impugned order and allowing the appeal on 25.08.2023.