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TMI Blog2016 (8) TMI 91X X X X Extracts X X X X X X X X Extracts X X X X ..... all the relevant facts under cover of its letter dated 28.7.2006 before availing credit. In this letter the Appellant had clearly informed the jurisdictional Assistant Commissioner about the business Model that it was to follow and of its intention to avail credit on the input, input services and capital goods that it was to use for rendering its output service. The Appellant had also informed the Revenue of the fact that the pipeline which is being laid would be embedded to the earth. Given the aforesaid facts we are of the view that there has absolutely no suppression whatsoever on the part of the Appellant so as to warrant invocation of the extended period of limitation. - Demand set aside - Decided in favor of assessee. - Appeal No. ST/88514/14 - Order No. A/88033/16/STB - Dated:- 17-6-2016 - Mr. M.V. Ravindran and Mr. C.J. Mathew, JJ. For The Appellant : Shri Vipin Kumar Jain, Advocate, Shri Vishal Agarwal, Advocate For The Respondent : Shri V.K. Singh, Spl Counsel Per: M.V. Ravindran The undisputed fact of the case is that the Appellant is rendering Transportation of Gas through pipeline services, for which it has laid cross country pipelines from Ka ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd that the said services were availed of for creation of an immovable property and that the Larger Bench of the Tribunal has in the case of Bharti Airtel vs CCE 2012-TIOL-209- CESTAT-MUM has held that credit on goods and services used in the erection of a telecom tower, which is a immoveable property, cannot be availed under the Cenvat Credit Rules. The respondent has also held that there was no direct nexus between the credit availed and the output services to be rendered and in the absence of the same credit could not be readily admissible. Insofar as the credit on other input services and capital goods is concerned, the respondent has denied the same only on the ground that appellant was under an obligation to provide the input services and the pipes, valves, compressor, etc (capital goods) for the purpose of laying the pipeline, consequently credit on the same was not admissible in the hands of the appellant and would be an input/input service for the pipeline laying contractor, who could have taken credit. 7. We have heard Shri Vipin Jain, Ld Counsel for the Appellant, who has contended that : (i) Insofar as the credit availed of the tax paid by the pipeline laying cont ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... il cenvat credit on various inputs/input services and capital goods that were to be used for providing the output services. In that letter the Appellant had specifically pointed out that the pipes that would be laid would be embedded to the earth and had sought permission to avail credit. The Assistant Commissioner had after taking due note of the Appellant s submissions, informed it that it was eligible to avail credit under cover of its letter dated 11.10.2006. Further the fact of availment of credit from time to time was also reflected in the ST-3 returns. 8. Shri V K Singh the Ld. Special Counsel, for the respondent has contended that Appellant being a service provider was entitled to avail cenvat credit on the inputs, capital goods and input services received by it, however in the Appellants case the pipeline laid by the contractor was an immoveable property, which is neither capital goods nor input services and consequently credit was not admissible. Further for credit on input services to be held as admissible there has to be a direct nexus between the input service and the output service. Only in the case of a manufacturer would credit be admissible even if services have ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rvice provider and a manufacturer. 11. The main limb of the definition of input service provides qua a service provider stipulates that credit would be admissible in respect of any service used by a provider of output service for providing an output service. We are concerned here with credit of service that has been used for laying a pipeline, which by itself was used for providing the output service of transportation of gas through pipeline. There cannot be a more direct immediate nexus, between availing the input services and rendition of output service. It is beyond our comprehension as to how the Appellant could have rendered its output service without availing of the services of the pipeline laying contractors. The said services in our view are clearly eligible to credit by virtue of the main limb of the definition of input services. 12. Even otherwise the inclusive limb of the definition also specifically covers services used in relation to setting up, modernization or repair of a factory, premises of a provider of output service or an office relating to such factory or premises. It is not in dispute that the services used for laying of the pipeline were used for settin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... emoval. But for the factory the final product could not have been manufactured and the factory needed to be constructed on land. The land and the factory are used by the manufacturer in any event indirectly in or in relation to the manufacture of the final product, namely, metal-sheets. The respondents case, therefore, falls within the first part of Rule 2(l) aptly referred to by Mr. Amrinder Singh as the means part. 9. The respondents case also falls within the second part of Rule 2(l) i.e. the inclusive part. The definition of the words input service also specifically includes the services used in relation to setting up of a factory. Mr. Amrinder Singh rightly contended that it was not the Appellant s case that the services were not used for the setting up of the factory. The doubt in this regard is set at rest by the second part of Section 2(l)(ii) which includes within the ambit of the words input service the setting up of a factory and the premises of the provider of the output service. The inclusive definition, therefore, puts the matter, at least so far as the payment for services rendered by the civil contractor for setting up the factory is concerned, beyond d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ital goods. There was no dispute therein with regard to credit on input services if any. The said judgement does not at all deal with the scope and ambit of the definition of input services which has been dealt by two other co-ordinate benches of the Hon ble High Court in the case of Ultra Tech Cement vs CCE 2010 (20) STR 57 Bom and Coca Cola India Pvt Ltd vs CCE 2009 (15) STR 657, wherein it has been specifically held that the definition of input services is wider than the definition of inputs. 17. The other decision which the Ld. Counsel of the Revenue relied upon was that the Larger Bench of the Tribunal in the case of Tower Vision India Pvt Ltd vs CCE 2016 TIOL 539 CESTAT-DEL-LB. The said judgement also was dealing with the dispute with respect to eligibility of cenvat credit of then duty paid on MS angles, channels/parts of tower, etc, which were used for fabrication of telecom towers, as inputs or capital goods. This judgement also does not deal with eligibility of cenvat credit on input services and consequently cannot be relied upon to deny input service credit in the hands of the Appellant. 18. The other set of input service credit which has been denied in the impugn ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... edit in the hands of the service recipient as capital goods. While on the other hand in the later type of contract, where it is service providers obligation to supply and replace the part, then the very same part would have been eligible to credit in the hands of the service provider as an input being used for rendition of an output service. We are not concerned in this case with the later type of contract. From the record it clearly comes out that the privity of contract in the instant case was between the Appellant and the service provider and that these service providers were under no obligation whatsoever to the pipeline laying contractors nor were the pipeline laying contractors under any obligation to pay for the said services or to compensate or otherwise for the deficiency in the services of the said service providers. This being the case the finding that services availed of from the other service providers as also the capital goods were used by the pipeline laying contractors is clearly untenable. 20. We find that the coordinate bench of the Tribunal has in the case of GSPL in its clarificatory order dated 18.9.2013 addressed a similar issue and held that were a service ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e allegation levelled in the notice as also the findings of the Respondent and merit rejection on this count alone, we also find that the same is otherwise also completely untenable. 23. Insofar as the inapplicability of the Judgement of the Hon ble High Court in the case of Bharti Airtel to the credit on input services is concerned, the same has already been dealt by us in the preceding part of the order. We accordingly hold that the contention of the Ld Special Counsel was in error in contending that credit on input services was not admissible as the same had been used in respect of laying of a pipeline, which became an immoveable property. 24. Coming to the credit on capital goods, it is not in dispute that pipes, valves and compressor on which credit had been availed are all specified capital goods on which credit is available as capital goods. There is also no dispute that there pipes, valves, compressors are all being used for rendition of the output service. The limited issue, which needs to be examined is whether the judgement of the Hon ble Bombay High Court in the case of Bharti Airtel can be so interpreted to mean that credit in respect of goods, which qualify as c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the same have been made immovable for their effective utilization. If this was the logic to be applied, then the very scheme for credit on capital goods which was introduced from the year 1994 would be a nullity and a dead letter in as much there is hardly any machine, which is not made immovable for its effective utilization. In our view as long as the goods on which credit are being availed in their receipt to the factory or the premises of the service provider qualifies as capital goods, the mere fact that the same are being subsequently immoveable subsequently for their effective utilisation cannot be a ground for denying credit as capital goods. 28. We find that the coordinate bench of this Tribunal has in the case of CCE vs JSW Ispat Steel Ltd reported in 2015 (327) ELT 549 has specifically dealt with this very issue. The relevant observations are extracted herein below: 5.1 As per Rule 2(a) of Cenvat Credit Rules, 2004, capital goods means :- (A) the following goods, namely :- (i) all goods falling under Chapter 82, Chapter 84, Chapter 85, Chapter 90, Heading No. 68.05 grinding wheels and the like, and parts thereof falling under heading 6804 of the Firs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... achinery or components are assembled together, it will be pre-posteriors to suggest that the capital goods credit cannot be allowed on this individual machinery/equipment or appliances. The purpose of allowing capital goods credit is to relieve the burden of cascading effect of taxes. If that purpose is to be achieved in a meaningful way, the law has to be interpreted in a reasonable manner so that the object is achieved. 5.2 In the decisions relied upon by the Appellant, the issues contested by the Revenue have been adequately addressed. For example, in the case of Pepsi Foods (supra), it has been held that ownership of goods is not a criterion for denial of credit on capital goods and even if it is leased for a particular period, the assessee is eligible to take Cenvat credit. In the present case, merely because M/s. Inox Air Products Ltd. has leased out the plant to the Appellant, that does not disentitle the Appellant from availing Cenvat credit of the excise duty paid on capital goods. Similarly, in the case of Gujarat Ambuja Cement Ltd. (supra), Rajarambapu Patil SSK Ltd. (supra) and KCP Ltd. (supra), this Tribunal and the Hon ble High Court of Himachal Pradesh held that C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndertake any process either in relation to manufacture of goods or in the rendering of any services and, therefore, it was held that iron and steel products and cement which have gone into the erection of any immovable property cannot be considered as capital goods. Thus, the facts involved in the said case are also completely different and distinguishable from those involved in the case before us. Therefore, the ratio of the said decision also has no application. 6. In view of the above, we are of the considered view that the Appellants are rightly entitled for capital goods credit on various machinery, equipment, appliances and parts and components thereof used in the setting up of oxygen plant within the factory premises. Thus the order denying the capital goods credit is unsustainable in law. Accordingly, we set aside the same. Since the impugned order is set aside, the appeal filed by the Revenue against the corrigendum issued becomes infructuous and therefore, the Revenue s appeal is liable to be dismissed. 29. In view of the above, we hold that the additional ground urged by the Ld Counsel also does not further the case of the Revenue and the Appellant is as such clear ..... X X X X Extracts X X X X X X X X Extracts X X X X
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