2023 (12) TMI 47 - AT - Service Tax

CENVAT Credit - inputs or not - manufactured LED lights, fixtures and control panels etc. The department objected to the fact of availment of cenvat benefit on the ground that the appellant cannot avail of such credit of duty paid on their own finished goods, as the same cannot be treated as raw material/inputs for provision of taxable output services. HELD THAT - On perusal of the definition of input is contained in Rule 2(k) of the CENVAT Credit Rules, 2004, it would reveal that all goods used by any service provider, for providing any output service, should be eligible for consideration as input . In this case, the disputed goods namely LED lightings, fixtures and control panels were used by the appellants for provision of the taxable services to the service recipient i.e., the Municipality/Municipal Corporation. Since, those disputed goods in the form of inputs were used and utilized for provision of the output service and service tax liability on provision of such services were duly discharged by the appellants, it cannot be said that the disputed goods shall not be considered as inputs for the provision of the output services. Further, consideration of the ownership is not a criteria for determining whether the disputed goods should be eligible for the cenvat benefit or otherwise. Since, there is no restriction or embargo created in the statute, for establishment of ownership of the goods, which are used for the provision of the output service, the impugned orders passed by the learned adjudicating authority cannot be sustained on such grounds. In other words, usage of inputs is only confined to the factory in case of a manufacturer and premises in case of service provider. There are no merits in the impugned order, insofar as the adjudged demands were confirmed on the appellants, holding that the disputed goods shall not be considered as inputs for the purpose of the provision of the taxable output service - appeal allowed.

Summary

Issues involved: Classification of services under taxable categories, eligibility of Cenvat Credit on manufactured goods used for services, ownership of goods supplied, denial of Cenvat benefit.

Classification of services under taxable categories: The appellants entered into agreements with Municipalities/Municipal Corporations for energy conservation measures and maintenance services, classified under "Scientific and Technical Consultancy Services" and "Maintenance and Repair Service". The audit wing observed the appellants manufactured LED Lights, leading to a dispute over Cenvat Credit eligibility.

Eligibility of Cenvat Credit on manufactured goods: The department objected to the appellants availing Cenvat Credit on LED Lights manufactured by them, arguing they cannot claim credit on their own finished goods as inputs for taxable services. The department also contended that since the ownership of the goods remained with the Municipality/Corporation, the appellants could not benefit from the service tax or Central Excise duty paid on those goods.

Ownership of goods supplied: The department held that the appellants' manufactured goods could not be considered as inputs for their services as ownership transferred to the Municipality/Corporation after the contract period. This led to the denial of Cenvat Credit on the LED lightings and fixtures by the department.

Denial of Cenvat benefit: The appellants argued that since they were registered for manufacturing excisable goods and providing taxable services, availing Cenvat Credit on manufactured goods used for services was justified. They contended that the denial of Cenvat benefit on LED lights, fixtures, and control panels by the department was unwarranted.

The Tribunal examined whether the disputed goods should be considered as inputs for Cenvat Credit eligibility based on Rule 2(k) of the CENVAT Credit Rules, 2004. The definition of "input" includes goods used for providing any output service. The disputed goods, LED lightings, fixtures, and control panels, were used by the appellants for providing taxable services to the Municipality/Municipal Corporation. Ownership was deemed irrelevant in determining Cenvat Credit eligibility, as long as the goods were used for providing the output service and taxes were duly paid. The Tribunal concluded that the impugned orders denying Cenvat Credit on the manufactured goods for services were not sustainable. Therefore, the appeals were allowed in favor of the appellants, with consequential benefits as per law.