‘Input Service’ Include Any Service Received In Or In Relation To Setting Up, Modernisation, Renovation Or Repair Of The Factory Premises: CESTAT Allows Cenvat Credit

The Chandigarh Bench of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) has held that the construction services and other services that are necessary for the renting of the business fall under the definition of ‘input service’ as provided under Rule 2(l) of the Cenvat Credit Rules, 2004.

The two-member bench of S. S. Garg (Judicial Member) and P. Anjani Kumar (Technical Member) has observed that the definition of ‘input service’ is very wide and includes any service received in or in relation to the setting up, modernization, renovation, or repair of the factory premises.

The assessee or appellant is in the business of manufacturing excisable goods falling under Chapter 87 of the Central Excise Tariff Act, 1985, and is availing of the facility of Cenvat Credit for the duty paid on inputs, input services, and capital goods as envisaged under Rule 3 of the Cenvat Credit Rules, 2004.

Two show-cause notices were issued. It was alleged that during the course of the audit, it was found that the appellant had taken Cenvat Credit for service tax paid on civil construction and maintenance services of items other than plant and machinery that are not covered under the definition of ‘input service’ under Rule 2(l) of the Cenvat Credit Rules, 2004 for the purpose of availing of Cenvat Credit.

The appellant contended that the adjudicating authority has ignored the inclusive portion of the definition under Rule 2(l) of the Cenvat Credit Rules, 2004, which specifically mentioned the services used in or in relation to the setting up, modernization, renovation, or repair of factory premises or an office relating to such factory premises. The construction services have been obtained by the appellant for the construction or renovation of their factory premises for the manufacture of dutiable goods.

The Tribunal held that each limb of the definition of input service can be considered an independent benefit or concession exemption. If an assessee can satisfy any one of the limbs of the above benefit, exemption, or concession, then credit for the input service would be available. This would be so even if the assessee does not satisfy other limbs of the above definition. To illustrate, input services used in relation to setting up, modernization, renovation, or repairs of a factory will be allowed as credit, even if they are assumed not to be an activity relating to business, as long as they are associated directly or indirectly with the manufacture of final products and the transportation of final products up to the place of removal.

Case Title: M/s Rico Auto Industries Ltd. Versus Commissioner of Excise

Case No.: Excise Appeal No. 1677 Of 2012

Date: 12.05.2023

Counsel For Appellant: Ram Chander Choudhary

Counsel For Respondent: Manoj Nayyer

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