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TMI Blog2023 (9) TMI 713X X X X Extracts X X X X X X X X Extracts X X X X ..... OMPONENTS 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itled for the Cenvat Credit due to amendment to Rule 2K with effect from 08.07.2009, which was made effective retrospectively. The Adjudicating Authority also taken into account the amendment made with effect from 01.04.2011, whereby the setting of factory was excluded from the definition of input service. As regard the insurance service for staff/directors the adjudicating authority has contended this service was used for welfare and health of staff and directors and the same is nowhere being utilized in our relation to manufacturing process, directly and indirectly. Therefore, it cannot be considered as input service. Being aggrieved by the Order-in-Original the appellant filed the present appeal. 2. Ms Priyanka Rathi Learned Counsel, appearing on behalf of the appellant submits that it is evident from the record that construction service received by the appellant is in respect of expansion, modernization, modification of the existing plant and the same was not excluded in the definition of Input service under Rule 2(l). It is her submission that even though setting up was removed from the inclusion portion of the definition but other activity such as modernization, renovation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the input service prior to 01.04.2011 and definition with effect from 01.04.2011 at the relevant time under Rule 2(l) was as under: Definition prior to 01.04.2011 input for which means any service- i. used by a provider of taxable service for providing an output service; or ii. used by the manufacturer, whether directly or indirectly, in or in relation to the manufacture of final products and clearance of final products up to the place of removal; and includes services used in relation to setting up modernization renovation or repairs of a factory , premises of provider of output service or an office relating to such factory or premises , advertisement or sales promotion, market research. storage up to the place of removal , procurement of inputs, activities relating to business such as accounting, auditing, financing, recruitment and quality control, coaching and training, computer networking, credit rating, share registry, inward transportation of inputs or capital goods and outward transportation up to the place of removal Definition of 'input service' w.e.f. 01.04.2011 Input service means any service- i. used by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dernization, renovation and repairs of factory premises was clearly covered under the inclusion part of the definition. 4.2 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. This issue has been considered in various judgments cited above by the learned counsel, which is reproduced below: (a) In the case of Bellsonica Auto Components (Supra) the Punjab Haryana High Court has passed the following order: 8. The land was taken on lease to construct the factory. The factory was constructed to manufacture the final product. The land and the factory were required directly and in any event indirectly in or in relation to the manufacture of the final product and for the clearance thereof up to the place of removal. But for the factory the final product could not have been manufactured and the factory needed to be constructed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the builder before, during or after construction (except in cases for which no sum is received from or on behalf of the prospective buyer by the builder or the person authorised by the builder before grant of completion certificate by the authority competent to issue such certificate under any law for the time being in force shall be deemed to be service provided by the builder to the buyer. 11. If in fact the said services were not covered by Rule 2(l), it would not have been necessary to introduce the amendment. It is clear, therefore, that prior to the amendment the setting up of a factory premises of a provider for output service relating to such a factory fell within the definition of input service. The amendment of 2011 is not retrospective and is not applicable to the respondents case. 12. Our view is supported by the judgment of a Division Bench of the Bombay High Court in Coca Cola India Pvt. Ltd. v. Commissioner of C. Ex., Pune-III, 2009 (242) E.L.T. 168 (Bom.). = 2009 (15) S.T.R. 657. The Division Bench construed Section 2(l) as follows :- 39. The definition of input service which has been reproduced earlier, can be effectively divided into the follo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d of exemption are not satisfied and such income is not free from tax under that head of exemption. We are in respectful agreement with the judgment of the Bombay High Court. 13. We approve the findings of the Tribunal as well as the basis on which they have been arrived at. 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. 14. In the circumstances, the questions of law are answered against the appellant and in favour of the assessees/respondents. The appeal is dismissed. (b) In the case of Milestone preservatives Pvt. Ltd (Supra) this Tribunal has passed the following order: 4. I have considered the submissions made by learned Authorised Representative and perused the record. I find that right from beginning the appellant is taking a stand that construction and architectural services are used for repair and renovation of factory. This submission of the appellant was not effectively rebut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es is definitely continued to fall within the ambit of said definition. Consequently, the Service Tax paid on construction service' involving modernization, renovation and repair work within the factory is eligible to credit. Before scrutiny of the rival contentions: the relevant old and amended Rule 2(1) of the Cervat Credit Rules. 2004 are reproduced as below: Prior to 1-4-2011 input service means any service. (i) used by a provider of taxable service for providing an output service, or (ii) used by the manufacturer, whether directly or indirectly, in or in relation to the manufacture of final products and clearance of final products up to the place of removal, and includes services used in relation to setting up, modernization, renovation or repairs of a factory, premises of provider of output service or an office relating to such factory or premises, advertisement or sales promotion, market research, storage up to the place of removal, procurement of inputs, activities relating to business, such as accounting auditing, financing recruitment and quality control, coaching and training, computer networking, credit rating share registry, and security, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... used primarily for personal use or consumption of any employee; Explanation. - For the purpose of this clause, sales promotion includes services by way of sale of dutiable goods on commission basis. 8. A plain reading of the said provisions makes it clear that service utilized in relation to modernization, renovation and repair of the factory are definitely fall within the meaning of 'input service' even though; construction of a building or civil structure or part thereof has been placed under exclusion clause of the said definition of input service. After amendment to the definition of the 'input service', a clarification issued by the Board vide Circular No. 943/4/2011-CX, dated 29-4-2011 whereunder answering to the questions raised on the eligibility of credit of service tax paid on construction service as an input service' used in modernization, renovation or repair, it has been clarified that the said services being provided in the inclusive part of definition of 'input service' are definitely eligible to credit. Thus, harmonious reading of the inclusive part of the definition and the exclusion clause mentioned at clause (a) relating to c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to note that when the exclusion was brought in the rules, services relating to setting up of the factory was removed from the inclusion clause of the definition of input service in rule 2(l) of Cenvat Credit Rules, 2004 therefore, there is a direct nexus of the service mentioned in the exclusion clause and setting up of the factory. It is important to note that the legislature consciously continued the services of renovation, modernization, repairs appearing in the inclusion clause of definition of input service. This clearly shows that any service relating to modernization, renovation of the existing factory is admissible as input service which is the direct case of the appellant. This aspect has been considered in various judgments which are reproduced below :- Bharat Coking Coal Ltd. v. Commr. of Central Excise S. Tax, Ranchi - MANU/CK/0036/2021 Further, the said CHP has been set up with 9. the view to modernise the coal loading process in the mines also satisfies the definition of input service. Moreover, since the credit has been allowed by the Department on certain invoices raised by the Contractor, the Department has in-principle found the service to be eligi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... emoval, and includes services used in relation to setting up, modernization, renovation or repairs of a factory, premises of provider of output service or an office relating to such factory or premises, advertisement or sales promotion, market research, storage up to the place of removal, procurement of inputs, activities relating to business, such as accounting, auditing, financing, recruitment and quality control, coaching and training, computer networking, credit rating, share registry, and security, inward transportation of inputs or capital goods and outward transportation up to the place of removal; From 1-4-2011 input service means any (l) service, (i) used by a provider of output service for providing an output service; or (ii) used by a manufacturer, whether directly or indirectly, in or in relation to the manufacture of final products and clearance of final products up to the place of removal, and includes services used in relation to modernisation, renovation or repairs of a factory, premises of provider of output service share registry, security, business exhibition, legal services, inward transportation of inputs or capital goods and o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nclusive part of definition of input service are definitely eligible to credit. Thus, harmonious reading of the inclusive part of the definition and the exclusion clause mentioned at clause (a) relating to construction service of the definition of input service , it is clear that the construction service relating to modernization, renovation and repair of the factory continued to be within the meaning of input service and accordingly, the Service Tax paid on such service is eligible to credit. Undisputedly, the appellant carried out modernization/renovation work to meet USA, FDA guidelines for manufacture of their products therefore, the service tax paid on such construction service is eligible to credit. In the result, the impugned order is set aside and the appeal is allowed with consequential relief, if any, as per the law. Musaddilal Projects Ltd. v. Commr. of C. Ex., Cus. S.T., Hyderabad-I - 2017 (4) G.S.T.L. 401 (Tri. - Hyd.) The department has denied credit alleging 15. that all these services are for setting up of premises of the appellant and therefore not admissible. It is the case of appellant that the input services were not availed for setting up of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appeal is allowed. 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, we hold that appellant is entitled for the Cenvat credit on construction service used for modernization, renovation, upgradation of the existing factory. 4.3 As regard the admissibility of Cenvat credit on insurance service for health insurance of staffs/directors, we find that in the following judgment the similar issues has been considered and it was held that Cenvat credit on insurance service for staffs /directors is admissible. (a) In the case of Stanzen Toyotetsu India Pvt. Ltd (Supra) The Hon ble High Court of Karnataka has passed the following decision: 14. In so far as Insurance coverage to the employees is concerned in the course of employment if the employees suffer injury or dies, there is a vicarious liability imposed on the employer to compensate the employee. If the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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