2023 (9) TMI 713 - AT - Central Excise

CENVAT Credit - input services - insurance of Staff/Directors services - construction and restoration services for upgradation of factory premises - period of April-2008 to October-2012 - HELD THAT - From the definition of input service under Rule 2(l) before and after 01.04.2011, the services in relation to modernization, renovation and repairs of factory premises was clearly covered under the inclusion part of the definition. As per the invoices of the service provider there is no dispute that the appellant have used the construction service in relation to modification, renovation, upgradation of the existing plant. Therefore, in view of the definition for both the period, which includes these services in the definition of input service, appellant has correctly availed Cenvat credit on construction service in the present case. In the case of COMMISSIONER CENTRAL EXCISE COMMISSIONERATE, DELHI-III VERSUS M/S BELLSONICA AUTO COMPONENTS INDIA P. LTD. 2015 (7) TMI 930 - PUNJAB HARYANA HIGH COURT the Punjab Haryana High Court has held that The Tribunal rightly did not agree with the Commissioner s findings that the services in question had been used for brining into existence an immovable property and not for the manufacture of the final product. The said services cannot be said to be remotely connected to the final product as observed by the Commissioner. In the case of MILESTONE PRESERVATIVES PVT. LIMITED VERSUS C.C.E. S.T. -VADODARA-I 2022 (5) TMI 1038 - CESTAT AHMEDABAD this Tribunal has held these services were used for repair and renovation work in the existing factory. As held in various judgments only such construction services which are used in initial setting up of factory are excluded. However, in the present case, the factory was already existing and this construction and architectural service were used for repair and renovation of the existing factory plant. As per the inclusion clause of definition of Input Services, repair and renovation/modernization is specifically included in the inclusion clause. Therefore, construction or architectural service if used for initial set up of plant will only be ineligible for Cenvat credit. From the above judgments, it can be seen that constant view was taken by various forums that in case of construction service used in relation to modernization, renovation of the existing factory is admissible input service, in terms of inclusion part of the definition under Rule 2(l) of Cenvat Credit Rules, 2004 therefore, the issue is no longer res-Integra. Accordingly, the appellant is entitled for the Cenvat credit on construction service used for modernization, renovation, upgradation of the existing factory. Cenvat credit on insurance service for health insurance of staffs/directors - HELD THAT - Similar issues has been considered and it was held that Cenvat credit on insurance service for staffs /directors is admissible - In the case of COMMISSIONER OF CENTRAL EXCISE, BANGALORE-III, COMMISSIONERATE VERSUS STANZEN TOYOTETSU INDIA (P.) LTD. 2011 (4) TMI 201 - KARNATAKA HIGH COURT , where the Hon ble High Court of Karnataka has held that the said Group Insurance Health Policy taken by the assessee is a service which would constitute an activity relating to business which is specifically included in the input service definition. In view of the above judgment the credit on insurance for staff/ directors is admissible input service. However, the appellant have admittedly reversed the Cenvat credit in respect of insurance service for the period post 01.04.2011. Accordingly, the demand of Cenvat credit on insurance service which was reversed by the appellant is maintained, without expressing any view on merit. Considering the overall facts and circumstances of the case the penalty is also set aside - appeal allowed.

Summary

Issues Involved:
1. Entitlement to Cenvat Credit for construction and restoration services for factory premises.
2. Entitlement to Cenvat Credit for insurance services for staff/directors.

Summary:

1. Entitlement to Cenvat Credit for Construction and Restoration Services:
The core issue is whether the appellant is eligible for Cenvat Credit on construction services used for the upgradation of factory premises from April 2008 to October 2012. The Adjudicating Authority denied the credit based on the Vandana Global judgment and amendments to Rule 2(l) effective from 08.07.2009 and 01.04.2011, which excluded setting up of a factory from the definition of input service. The appellant contended that the construction services were for expansion, modernization, and modification, which were not excluded from the definition of input services.

The Tribunal examined sample invoices and found that the construction services were indeed used for the renovation, modernization, and upgradation of the existing plant. The definition of 'input service' before and after 01.04.2011 included services related to modernization, renovation, and repairs of a factory. The Tribunal relied on several judgments, including Bellsonica Auto Components, Milestone Preservatives Pvt. Ltd., Ion Exchange (I) Ltd., and Bombay Market Art Silk Co., which consistently held that construction services for modernization and renovation of existing factories qualify as input services. Consequently, the appellant was entitled to Cenvat Credit on construction services.

2. Entitlement to Cenvat Credit for Insurance Services:
The second issue was whether the appellant could claim Cenvat Credit for insurance services for staff and directors. The Adjudicating Authority denied the credit, arguing that these services were for personal welfare and not related to the manufacturing process. The appellant reversed the credit for the period post 01.04.2011 but claimed it for the period prior.

The Tribunal referred to judgments such as Stanzen Toyotetsu India Pvt. Ltd. and Shri Sai Calanates India Pvt. Ltd., which held that insurance services for staff and directors are admissible as input services when they relate to statutory obligations or business activities. Therefore, the credit on insurance services for the period prior to 01.04.2011 was admissible. However, the appellant's reversal of credit post 01.04.2011 was maintained without further comment on the merits.

Conclusion:
The Tribunal allowed the appeal, granting Cenvat Credit for both construction and insurance services, and set aside the penalty.