2023 (7) TMI 712 - AT - Central Excise

CENVAT Credit - input services or not - services availed for setting up of a factory - scope of Rule 2(l) of the CCR w.e.f. 01.04.2011 - HELD THAT - The definition of input services was amended w.e.f 1.04.2011 wherein the words setting up of the plant available in the earlier definition has been specifically excluded. Hence the department contended that the Appellant was not eligible for the input services credit used in setting up of the plant after 1.04.2011. However the Appellant contended that the definition still covers input services used for setting up of the plant under the means part of the definition - the issue has been dealt by the Tribunal in the case of PEPSICO INDIA HOLDINGS (PVT.) LTD. VERSUS COMMISSIONER OF CENTRAL TAX TIRUPATI 2021 (7) TMI 1094 - CESTAT HYDERABAD wherein it has been observed Although setting up the factory is not manufacture in itself it is an activity directly in relation to manufacture. Without setting up the factory there cannot be any manufacture. Service used in setting up the factory are therefore unambiguously covered as input services under Rule 2 (I) (ii) of the CENVAT Credit Rules 2004 as they stood during the relevant period (post 1.4.2011). The mere fact that it is again not mentioned in the inclusive part of the definition makes no difference. Once it is covered in the main part of the definition of input service unless it is specifically excluded under the exclusion part of the definition the appellant is entitled to CENVAT credit on the input services used. The subject input services used in setting up of the plant have a direct nexus with the manufacture of final goods. Therefore these input services used in setting up of the plant are covered within the ambit of means clause of the definition of input service . Accordingly even if the word setting up is specifically excluded from the definition of input service w.e.f. 01.04.2011 such services used in setting up of the plant would still qualify as an input service as per Rule 2(l) of CCR 2004. Appeal allowed.

Summary

Issues involved:
The judgment involves the eligibility of CENVAT credit for 'input services' utilized in setting up a plant, specifically focusing on the definition post-amendment from 1.04.2011.

Details of the Judgment:

Issue 1: Eligibility of CENVAT credit for 'input services' used in setting up the plant
The Appellant, an Integrated Steel Plant, received various 'input services' for setting up the Steel Plant and availed CENVAT Credit prior to production commencement. The department issued a Show-Cause Notice confirming demands under various sections. The Appellant contended that the services used for setting up the plant are covered under the main clause of the definition of 'input service' as they are directly linked to manufacturing final products. They cited precedents like Pepsico India Holdings Pvt. Ltd. v. CCT, Triupati, to support their claim. The Departmental Representative argued that 'setting up of the plant' is excluded from the definition of 'input services'.

Issue 2: Interpretation of the definition of 'input services' post-amendment
The Tribunal analyzed the definition of 'input service' post-amendment from 1.04.2011, which excluded 'setting up of the plant'. Referring to the case of Pepsico India Holdings Pvt. Ltd., the Tribunal observed that the main part of the definition must be broad enough to cover the services in question for CENVAT credit eligibility. The term 'manufacture' under the Central Excise Act includes processes incidental or ancillary to manufacturing. The Tribunal concluded that services used in setting up the factory, although not explicitly included post-amendment, are covered under the 'means' clause of the definition.

Conclusion:
The Tribunal allowed the appeal, stating that the input services used in setting up the plant directly relate to the manufacture of final goods and fall within the 'means' clause of the definition of 'input service'. Despite the exclusion of 'setting up' from the definition post-amendment, such services are deemed eligible for CENVAT credit as per Rule 2(l) of CCR, 2004.

Significant Phrases:
- 'input services'
- 'setting up of the plant'
- 'CENVAT Credit'
- 'means clause'
- 'manufacture of final products'
- 'definition of input service'
- 'Central Excise Act'
- 'precedents'
- 'Tribunal's analysis'
- 'CENVAT Credit Rules, 2004'
- 'eligibility criteria'
- 'interpretation of the definition'
- 'precedent cases'
- 'exclusion clause'
- 'broad interpretation'
- 'final goods manufacturing'
- 'consequential reliefs'