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2025 (2) TMI 559 - AT - Service TaxDenial of CENVAT Credit - capital goods/input services - Electrical Transmission Tower Materials - 132 KVD/CTLNT Towers - Mild Steel Section for Templates - Health Insurance of staff and family - Consultancy for construction of railway line - Supervision charges for construction of Electrical Transmission Towers - denial of CENVAT Credit on the grounds of Excess credit availed and Credit availed on improper documents - applicability of the extended period of limitation - imposition of penalties. Whether the goods such as Electrical Transmission Tower Materials 132 KVD/CTLNT Towers and Mild Steel Section for Templates qualify as capital goods under Rule 2(a) of the CENVAT Credit Rules 2004? - HELD THAT - These items have been used by the Appellant in relation to transmission of electricity through Power Transmission Lines and thus the same are to be treated as components or accessories of capital goods falling in terms of Rule 2(a)(A) of the CENVAT Credit Rules 2004. These Power Transmission lines cannot be erected without transmission towers; the transmission towers hence are the necessary component of Power Transmission Line and thus the same are to be treated as the components or accessories of the capital goods falling under clause (i) of the Rule 2(a)(A) of the CENVAT Credit Rules 2004; as per clause (iii) the components spares and accessories of the goods specified at clause (i) and (ii) of Rule 2(a)(A) of the Rules are eligible as capital goods - the transmission towers are eligible capital goods in terms of clause (iii) of Rule 2(a) (A) of the CENVAT Credit Rules 2004 and the CENVAT Credit of duty of Rs.90, 44, 256/- has correctly been correctly availed by the Appellant in respect of such goods. This issue is no more res integra as an identical issue has already been examined in the case of M/s. Bharti Airtel Ltd. v. Commissioner of Central Excise Pune 2024 (11) TMI 1042 - SUPREME COURT wherein the Hon ble Apex Court has allowed the credit in respect of similar items/goods holding the same as components/accessories of capital goods falling under sub-clause (i) of Rule 2(a)(A) of the CENVAT Credit Rules 2004. Thus the Appellant is eligible for the credit in respect of Electrical Transmission Tower Materials 132 KVD/CTLNT Towers and Mild Steel Section for Templates . Accordingly the denial of CENVAT Credit to the appellant on this count is set aside. Whether services like Health Insurance of staff and family Consultancy for construction of railway line Supervision charges for construction of Electrical Transmission Towers and others qualify as Input services under Rule 2(l) of the CENVAT Credit Rules 2004? - HELD THAT - The provision of medical facilities within the Port Area is a pre-requisite for obtaining approval for the port under the Major Port Trust Act 1963 and the Indian Ports Act 1908. It has been stated by the Appellant that they have an insurance policy to cover the hospitalization expenses of the employees and their family members as per the company s policy of the Corporate Social Responsibility . Therefore the same are input services for availing credit of Service Tax - the denial of credit in respect of Health Insurance of staff and family vide the impugned order is not sustainable. Whether the denial of CENVAT Credit on the grounds of Excess credit availed and Credit availed on improper documents is justified? - HELD THAT - The submission of the Appellant that discrepancies pointed out by Revenue in the Show Cause Notice such as Telephone bills in name of employee non-mentioning of Service Tax Registration number in invoices invoices in name of previous entity viz. Tata Steels Jurisdictional details not mentioned etc. are procedural infractions due to which substantive benefit of credit cannot be denied to the Appellant are agreed upon. Accordingly the CENVAT Credit availed by the Appellant in this regard remains allowed as they are covered within the definition of input services . However the Appellant is liable to reverse the credit of Rs.25, 544/- out of the credit of Rs.9, 65, 903/- along with interest which the Appellant had agreed to reverse before the ld. adjudicating authority. Consequently the Appellant is eligible for the credit of Rs.9, 40, 359/- Rs.9, 65, 903/- - Rs.25, 544/- denied by the ld. adjudicating authority and they are liable to reverse the credit of Rs.25, 544/- along with interest if not reversed already. Extended period of limitation - HELD THAT - The issues involved in the present appeal were subject matters of litigation before various legal fora. Further the Department has not brought in any evidence to establish the allegation of suppression with intention to evade tax on the part of the Appellant. In these circumstances the invocation of extended period of limitation is not sustainable. Therefore the Appellant succeeds on merits as well as on limitation. Levy of penalties - HELD THAT - The penalties are not imposable on the Appellant. Accordingly the penalties imposed are set aside. Conclusion - i) The denial of CENVAT Credit for items listed as capital goods and input services was set aside. ii) The Appellant was required to reverse specific amounts of credit they agreed to but the remaining credit was deemed eligible. iii) The demand raised by invoking the extended period of limitation was set aside and no penalties were imposed. Appeal disposed off.
ISSUES PRESENTED and CONSIDERED
The core legal questions considered in this judgment revolve around the denial of CENVAT Credit claimed by the Appellant, M/s. The Dhamra Port Company Limited, on various goods and services categorized as either capital goods or input services under the CENVAT Credit Rules, 2004. The issues include:
ISSUE-WISE DETAILED ANALYSIS 1. Capital Goods Classification The relevant legal framework involves Rule 2(a) of the CENVAT Credit Rules, 2004, which defines "capital goods." The Court interpreted that the items in question, such as "Electrical Transmission Tower Materials," are components or accessories of capital goods used in power transmission lines. The Court relied on precedents, including the Supreme Court's decision in M/s. Bharti Airtel Ltd. v. Commissioner of Central Excise, Pune, which recognized similar items as capital goods. The Court concluded that these items qualify as capital goods, allowing the CENVAT Credit claimed. 2. Input Services Classification The legal framework for input services is provided by Rule 2(l) of the CENVAT Credit Rules, 2004, which includes services used in relation to business activities. The Court examined services like "Health Insurance of staff and family," finding them integral to business operations under the Major Port Trust Act, 1963, and the Indian Ports Act, 1908. The Court referenced the Tribunal's decision in M/s. Indian Bank v. Commissioner of Service Tax, Kolkata, supporting the inclusion of such services as input services. Similarly, services related to construction, housekeeping, and advisory functions were deemed essential to the business, qualifying for CENVAT Credit. 3. Excess Credit and Improper Documentation For excess credit availed, the Appellant agreed to reverse part of the credit, which the Court upheld. Regarding credit availed on improper documents, the Court found procedural lapses, such as missing registration numbers, to be curable and not grounds for denying credit. The Court referenced the definition of input services, emphasizing the broad scope covering business-related services. 4. Extended Period of Limitation and Penalties The Court examined whether the extended period of limitation was applicable, noting the absence of evidence for suppression with intent to evade tax. Consequently, the invocation of the extended period was deemed unsustainable. The Court also found no basis for imposing penalties, considering the circumstances and lack of deliberate non-compliance. SIGNIFICANT HOLDINGS The Court established several core principles:
Final Determinations:
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