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2023 (9) TMI 297 - AT - Service TaxCENVAT Credit - steel materials such as Steel Plates, HR Plates, Angles, Channels etc. - providing output services such as Port service, Cargo Handling Service, Supply of Tangible goods for use - denial on the ground that the material on which the Cenvat credit was claimed were not used directly for providing of any taxable service - HELD THAT - The issue that any material used for making some equipment or building and in turn that equipment and barge is used for providing output service, material which were used shall be treated as input in terms of Rule 2(k) of Cenvat Credit Rules, 2004. On this very issue, much water has flown and even in the identical facts in the case of M/S. SHREEJI SHIPPING SERVICES INDIA LIMITED, M/S. KRISHNARAJ SHIPPING CO. LIMITED VERSUS COMMISSIONER OF CENTRAL EXCISE ST, RAJKOT. 2018 (7) TMI 2319 - CESTAT AHMEDABAD has held that steel material used for repair of barges are admissible for Cenvat credit. Thus, the issue is no longer res-integra accordingly any material used for construction of building or fabrication of any equipment which is in turn used for providing output taxable service, on the material so used, the credit is correctly admissible. Therefore, considering the settled legal position on the issue in hand, the impugned order is not sustainable, hence the same is set-aside. Enhancement of penalty - HELD THAT - As regards the Revenue s appeal, since it is only for enhancement of penalty which is nothing but consequential to confirmation of demand and when demand itself is not sustained there is no question of penalty. Hence the Revenue s appeal has no substance accordingly the same is liable to be dismissed. The assessee s appeal is allowed and Revenue s appeal is dismissed.
Issues Involved:
1. Entitlement of Cenvat credit on steel materials used in the manufacture of barges for providing output services. 2. Whether materials used for constructing equipment or buildings, which in turn are used for providing taxable services, qualify as inputs under Rule 2(k) of Cenvat Credit Rules, 2004. 3. Applicability of penalties when the demand itself is not sustained. Summary: Issue 1: Entitlement of Cenvat Credit on Steel Materials: The appellant claimed Cenvat credit on steel materials (Steel Plates, HR Plates, Angles, Channels) used in the manufacture of barges, which were employed to provide output services like Port Service, Cargo Handling Service, and Supply of Tangible Goods. The department contended that since these materials were not directly used for providing taxable services, the credit was not admissible. The appellant argued that under Rule 2(k), all goods used for providing output service qualify as inputs, and cited several judgments and a Board Circular supporting their claim. The Tribunal upheld the appellant's claim, referencing previous rulings, including the case of M/s. Shreeji Shipping Services India Limited and M/s. Krishnaraj Shipping Company Limited, where similar materials used for barge repairs were deemed admissible for Cenvat credit. Issue 2: Materials Used for Constructing Equipment or Buildings: The Tribunal considered whether materials used for making equipment or buildings, which are subsequently used for providing output services, qualify as inputs under Rule 2(k) of the Cenvat Credit Rules, 2004. It was noted that this issue had been extensively deliberated upon and resolved in favor of the assessee in several cases, including the Gujarat High Court's decision in Mundra Ports and Special Economic Zone Limited vs. CCE & Cus., and the Andhra Pradesh High Court's ruling in CCE, Vishakhapatnam-II vs. Sai Sahmita Storages (P) Limited. These judgments affirmed that materials used in constructing facilities or equipment integral to providing taxable services are eligible for Cenvat credit. Issue 3: Applicability of Penalties: The Tribunal also addressed the Revenue's appeal for enhancing penalties, which was deemed consequential to the confirmation of demand. Since the demand itself was not sustained, the Tribunal found no basis for imposing penalties. Consequently, the Revenue's appeal was dismissed. Conclusion: The Tribunal set aside the impugned order, allowing the assessee's appeal and dismissing the Revenue's appeal for penalty enhancement. The judgment reinforced that materials used for constructing or repairing equipment essential for providing output services qualify as inputs, thereby entitling the appellant to Cenvat credit.
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