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TMI Blog2023 (11) TMI 719X X X X Extracts X X X X X X X X Extracts X X X X ..... on of input service was added w.e.f. 01.04.2011 and it provided that services specified in certain sub-clauses of clause (105) of section 65 of the Finance Act in so far as they were used for construction of a building or a civil structure or a part thereof would be excluded w.e.f. 01.04.2011. It is also seen that the excludes part of the definition of input service was further amended w.e.f. 01.07.2012. When input service under rule 2(l) includes any service used in relation to modernization, renovation or repairs of factory either prior to 01.04.2011 or from 01.04.2011 upto 30.06.2012 or w.e.f 01.07.2012, the appellant would be entitled to avail CENVAT credit of the input service received in relation to renovation or repairs of factory and merely because w.e.f. 01.04.2011 the construction of a building or a civil structure or a part thereof has been excluded from the definition of input service would not mean that any service used in relation to renovation or repairs of factory would stand excluded from the definition of input service. The exclusion part would cover constructions at the time of setting up of the plant and would not include the repairs or renovation works ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... recovery of Rs. 64,04,899/- with interest and penalty. 2. The appellant is a holder of Central Excise Registration and is engaged in the manufacture of various iron and steel products, such as Sponge Iron, M.S Ingots, H.B Wire. The appellant claims that it has been paying duty regularly and filing the returns. 3. The present dispute relates to input service credit availed by the appellant on the services availed by the appellant with respect to renovation, repairs and modernizations of its plant and machinery. The case of the department is that the said services relate to industrial and commercial construction services/work contract services pertaining to civil works and would not be input services as defined under rule 2(1) of the CENVAT Credit Rules, 2004 [the CENVAT Rules]. 4. Various audit objections had been raised to which the appellant pointed out how the credit did not pertain to civil work but was in relation to renovations/repairs of the plant and machinery. The appellant also segregated and reversed the service tax credit apportionable to civil work to the extent of Rs. 9,95,156/- on 23.06.2014 with interest of Rs. 3,03,786/-. 5. However, two show cause not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rule 15(1) read with section 11AC(1)(a) Total 83,78,858/- 64,04,899/- 19,73,959/- 9. The department filed an appeal against that part of the order that dropped the demand and the Commissioner (Appeals) confirmed the demand of Rs. 64,04,899/- with interest and penalty. 10. Shri Krishnamohan K. Menon, learned counsel assisted by Ms. Parul Sachdeva, appearing for the appellant made the following submissions: (i) The adjudicating authority had examined each transaction and document to identify the exact scope of the transaction and the use of the input service to separate what was permissible and what was not. The invoices, work orders and Chartered Engineers Certificates were examined before permitting a substantial portion of the credit and denying the remainder. The Commissioner (Appeals) made a blanket reversal in two paragraphs without giving any substantial reason, but merely reiterating that everything was civil work. In this connection, reliance has been placed on the following decisions of the Tribunal: (a) Salora International vs. Commissioner C. Ex., New Delhi [201 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs and actual use of services and, therefore, the contention that the extended period of limitation could not be invoked cannot be raised. Learned authorised representative also submitted that though the services rendered by the appellant may be input services covered under the main definition but if they are covered by the exclusion clause, the appellant would be not eligible to avail CENVAT credit. 12. The submissions advanced by the learned counsel for the appellant and the learned authorised representative appearing for the department have been considered. 13. To appreciate the submissions, it will be appropriate to reproduce the definition of input service under rule 2(l) of the Credit Rules, as it stood prior to 01.04.2011, from 01.04.2011 to 30.06.2012 and then w.e.f. 01.07.2012. Prior to 01.04.2011 2(l) 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 product and clearance of final products upon the place of removal, and includes services used in relation to setting up, m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 upto the place of removal, procurement of inputs, accounting, auditing, financing, recruitment and quality control, coaching and training, computer networking, credit rating, share registry, security, business exhibition, legal services, inward transportation of inputs or capital goods and outward transportation upto the place of removal. but excludes- (A) service portion in the execution of a works contract and construction services including service listed under clause (b) of section 66E of the Finance Act (hereinafter referred as specified services) in so far as they are used for- (a) construction or execution of works contract of a building or a civil structure or a part thereof; or (b) laying of foundation or making of structures for support of capital goods, except for the provision of one or more of the specified services; or (emphasis supplied) 14. It would be seen from the aforesaid definition of input service in rule 2(l) of the Rules that while the means part ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ers entered between the Noticee and service provider, relevant invoices issued by the service providers etc. xxxxxxxxxx. 20.2 The Noticee, vide their letter dated GPIL/ST/F-626 451/2019/3716 dated 04.02.2019 have submitted detailed report for the entire period covered by this case containing month- wise details of service providers, description of the services provided, vendor's invoice no. and date, amount of service tax credit involved, total invoice value, purpose for which the services were used, summary sheet showing year-wise details of total service tax credit availed etc. Besides, they have also produced the copies of the relevant work orders and invoices on the strength of which the cenvat credit was taken by them for verification. They have also submitted additional submission in the matter where under they have produced details under Annexure A, B C etc. as explained above and also produced certificate dated 04.02.2019 of the Chartered Engineer who has certified the use of the services in question to defend their case. (emphasis supplied) 16. The Commissioner, thereafter, meticulously examined the services covered by the invoices and found that ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... invoices, copies of the relevant contract/work contract orders along with the certificate of the Chartered Engineer certifying the use of the various services received. I therefore find no reason to disallow cenvat credit of total Rs13,48,131/- taken/availed by the Noticee during the relevant period on the strength of said invoices. xxxxxxxxxxxx 23.5 However, on examining the use of services received under the cover of 03 invoices during year 2011-12 involving total cenvat credit of service tax of total Rs. 29,578/- and use of services received under the cover of 06 invoices involving cenvat credit of service tax of total Rs. 70,736/-, I find that they had used said services in connection with construction of RO water point and labour rest shelter, construction of partition wall, construction of parapet wall at rest centre, construction of speed breakers, construction at factory gate no.3, at main factory gate and dismental of civil structure. Such use of the taxable services in question is found to be covered under the exclusion clause of definition of the input service as defined under Rule 2 (1) of the Cenvat Credit Rules, 2004 and thereby I find that the Noticee wer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... zation, renovation or repairs of factory either prior to 01.04.2011 or from 01.04.2011 upto 30.06.2012 or w.e.f 01.07.2012, the appellant would be entitled to avail CENVAT credit of the input service received in relation to renovation or repairs of factory and merely because w.e.f. 01.04.2011 the construction of a building or a civil structure or a part thereof has been excluded from the definition of input service would not mean that any service used in relation to renovation or repairs of factory would stand excluded from the definition of input service. The exclusion part would cover constructions at the time of setting up of the plant and would not include the repairs or renovation works. 21. This issue stands decided in favour of the appellant by the Tribunal in M/s. Jai Balaji Industries Ltd. vs. Commissioner of Central Excise, Customs Service Tax, Durgapur [Excise Appeal No. 76215 of 2016 decided on 04.08.2022] and the relevant portion of the decision is reproduced below: 16. We find that the definition of input service has an inclusion clause and an exclusion clause. The intention of the government could never have been to cover certain services in the inclusion ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... here 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. (emphasis supplied) 18. In the above decision reliance was placed on the earlier decision in the case of Ion Exchange (I) Ltd. Vs. Commissioner of C. Ex., Cus. S.T., Surat-II [2018 (12) G.S.T.L. 302 (Tri. - Ahmd.)] wherein it was held as under:- 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 vid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ombay Market Art Silk Cooperative (Shop Warehouse) Society Ltd vs CCE ST Surat-I [2022-TIOL-444-CESTAT-AHM], decision dated 17.05.2022, it was held as under:- 5. From the above decision of this Tribunal it is clear that any construction and works contract if used for repair and renovation of existing factory, the same falls under inclusion clause of definition of Input Service, accordingly, the Cenvat credit is admissible. The impugned order is set aside and the appeal is allowed. 21. Further, the Board itself in Circular No. 943/4/2011-CX, dated 29-4-2011 has clarified as under:- 4. Is the credit of input services used for repair or renovation of factory or office available? Credit of input services used for repair or renovation of factory or office is allowed. Services used in relation to renovation or repairs of a factory, premises of provider of output service or an office relating to such factory or premises, are specifically provided for in the inclusive part of the definition of input services. 22. In view of the above the Appellants have correctly taken credit of service tax paid/borne in respec ..... X X X X Extracts X X X X X X X X Extracts X X X X
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