CENVAT Credit Can Be Availed On Input Services Of Commercial And Industrial Construction: CESTAT
The Chennai Bench of Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) has held that the CENVAT credit can be availed of on input services of commercial and industrial construction, fabrication and erection, manpower supply for construction, and Goods Transport Agency for construction materials, etc.
The bench of P. Dinesha (Judicial Member) and Vasa Seshagiri Rao (Technical Member) has observed that the period of dispute is from April 2008 to March 2011, and hence, the definition of “input service” as it stood prior to the amendment with effect from 1.4.2011 would apply. Rule 2(l) of the Cenvat Credit Rules, 2004 (CCR), as in force prior to April 1, 2011, defined 'input service' to mean any service used for providing an output service or used by the manufacturer in relation to the manufacture of the final product.
The appellant/assessee had availed CENVAT credit of duty paid on inputs and service tax on input services. CENVAT credit was availed on input services of commercial and industrial construction, fabrication and erection, manpower supply for construction, and the Goods Transport Agency for construction materials, etc., during the setting up of the unit in the years 2008–09, 2009–10, and 2010–11.
The department was of the view that the credit availed did not have any nexus with the manufacturing activity either directly or indirectly, and hence, the same were not used in the activities specified under the definition of Rule 2(l) of the CENVAT Credit Rules, 2004. This prompted the department to issue the Show Cause Notice, proposing to disallow the wrong input service credit availed by the appellant and recover it along with applicable interest and penalties. The appellant filed its reply justifying its stand of availing the above CENVAT credit, but, however, not satisfied with the reply, the adjudicating authority proceeded to confirm the disallowance as proposed, along with interest and penalty.
The assessee contended that the authority wrongly concluded that the input service tax credit was permissible only for those input services used in or in relation to the manufacture and clearance of products. The lower authority has failed to understand the broader scope and applicability of the definition of input service. It is in the nature of bringing into the fold of input services various services that do not have a nexus to the manufacture of goods but were generally rendered at a place different from the place of manufacture, which were clearly covered under the inclusive part of the definition of input service.
The issue raised was whether the department was justified in denying the availment of input service credit on the ground that the services in question did not have any nexus with the manufacturing activity.
The court, while allowing the appeal, held that the ambit of the definition prior to April 1, 2011 was large enough to cover all activities as long as there was no denial by the department that, after setting up the factory, no business was carried on from that premises.
Counsel For Appellant: R. Parthasarathy
Counsel For Respondent: R. Rajaraman
Case Title: M/s. Madras Cements Ltd. Versus Commissioner of GST & Central Excise
Case No.: Excise Appeal No.41472 of 2013