Cenvat Credit - input service - commercial or industrial construction services - construction of factory building, Service Tax

[Ramachandran and Ramachandran Associates Subramanian]

1. The assessee is a manufacturer of products chargeable to Central Excise Duty. The assessee avails CENVAT credit on capital goods, inputs and input services under the applicable provisions of Cenvat Credit Rule, 2004. 1. During 2008-09 and 2009-10 period, the assessee availed the construction service from contractors on which service tax had been paid and on the basis of invoices issued by the providers of commercial or industrial construction service/works contract service, had taken service tax credit. The construction service availed was for construction of factory buildings in the factory premises. 2. Taking a view that credit of input services can be taken only if the output is service liable to service tax or goods liable to excise duty and since in this case the outcome of the construction activity is immovable property, which is neither service nor goods, the input credit in respect of construction service is not available, a show cause notice was issued to the assessee for recovery of allegedly wrongly taken service tax credit under Rule 14 of the Cenvat Credit Rules, 2004 read with proviso to Section 11A (1) and Section 11AB of the Central Excise Act, 1944 and also for imposition of penalty under Rule 15 of the Cenvat Credit Rule, 2004 read with Section 11AC of the Central Excise Act, 19444. Is the department view correct ? The definition of input service includes all services in relation to setting up of a factory. Are there any decided case laws on this specific issue ?

Posts / Replies

[Naveed S]

Yes, the input service definition includes the construction services which were availed, in relation to the construction of factory buildings in the factory premises..

[rakshit verma]

Yes cenvat credit is admissible. Pl. see below:-

2011 (267) E.L.T. 216 (Tri. - Del.)

IN THE CESTAT, PRINCIPAL BENCH, NEW DELHI

[COURT NO. I]

Justice R.M.S. Khandeparkar, President and Shri Rakesh Kumar, Member (T)

SUZUKI MOTORCYCLE (I) PVT. LTD. Versus COMMR. OF C. EX., DELHI-III, GURGAON

Stay Order No. 325/2011-EX(PB), dated 25-2-2011 in Application No. E/Stay/847/2010 in Appeal No. E/801/2010

Stay/Dispensation of pre- deposit - Cenvat credit of Service tax - Commercial or Industrial Construction service - Service tax credit availed on construction of factory buildings sought to be denied - Construction service availed for buildings housing manufacturing facilities and office premises of factory and factory manufacturing excisable goods cleared on duty payment - Definition of input service covering services used in or in relation to setting up of factory and construction service in present case covered thereunder - Bar in Rule 6(5) of Cenvat Credit Rule, 2004 not applicable as no exclusive manufacture of exempted goods involved - Ground taken to deny credit that outcome of construction being immovable property and the same not being service or goods, not acceptable - Merit in plea of appellant that pre-deposit to cause undue hardship in view of prima facie strong case in their favour - Pre-deposit waived - Recovery stayed - Section 35F of Central Excise Act, 1944 - Rules 2(l) and 6 ibid. [paras 1, 4, 4.1, 5, 6]

Cenvat credit of Service tax - Input service - Commercial or Industrial Construction service availed for construction of factory buildings and office premises in factory covered under input service - Rule 2(l) of  Cenvat Credit Rule, 2004 [para 4.1]

Rakshit Verma        

sanskritibharat@gmail.com

[Naveed S]

Citation: [2011] 31 STR 100 (New Delhi - CESTAT) , 2011 (267) E.L.T 216 (Tri - Del.)

Suzuki Motorcycle (I) Pvt. Ltd Versus Commissioner Central Excise (2011 (2) TMI 56 - CESTAT NEW DELHI)

Waiver of pre-deposit – Cenvat credit of service tax - service of commercial or industrial construction covered by Section 65 (105) (zzq) of the Finance Act, 1994 availed for construction of buildings in the factory premises which house the manufacturing facilities and office premises of the factory - objection of the Department that the services, covered by Section 65 (105)(zzq) used for bringing into existence, factory buildings which is an immovable property on which no excise duty chargeable and, therefore, Cenvat credit not available - objection of the Department is not correct as the factory premises and office premises of the factory had been constructed by availing the services of commercial or residential construction service providers, for manufacture of excisable goods.

2 )Citation: 2011 (23) S.T.R. 271 (Tri. - Del.), 2011 (271) E.L.T. 559 (Tri. - Del.)

HI TECH POWER & STEEL LTD. Versus COMMR. OF C. EX., RAIPUR (2011 (3) TMI 775 - CESTAT, NEW DELHI)

Cenvat credit on construction of immovable property - Prima facie, this argument is not acceptable because coal shed is where coal is stored and are prima facie covered by services of input service under Rule 2-l(ii) - When the definition specifically includes ‘services relating to setting up of factory, credit on such services cannot be denied prima facie based on the argument that factory is an immovable property.

CESTAT AHMEDABAD

CADMACH MACHINERY CO (P) LTD Versus CCE AHMEDABAD

Cenvat Credit of Service Tax paid on various Input Service – held that:- definition of input service also includes services which are integrally connected with business of manufacture of final product.

CESTAT, NEW DELHI

M/s. Amtek Auto Ltd. Versus Commissioner of Central Excise Gurgaon

Cenvat credit of Service Tax in respect of services relating to construction services availed for the purpose of factory premises