TMI Blog2015 (6) TMI 307X X X X Extracts X X X X X X X X Extracts X X X X ..... Cenvat credit on the ratio of the law as has been laid down by the Hon'ble High Court in the case of CCE Vs. Sai Samhita Storages (P) Ltd. - [2011 (2) TMI 400 - ANDHRA PRADESH HIGH COURT] GSPL had floated a tender for laying of pipeline system of transportation of oil and gas under EPC contract. The pipes which were procured by the award winning contractor and the Cenvat credit of the Central Excise duty paid of such pipeline was availed by GSPL which was disputed and the Tribunal had held the dispute in favour of the Revenue. In the same case, the services were provided by various service providers to the EPC contract winner, was also denied and upheld by the Tribunal on the ground that service providers, provided services to EPC contract winner and not to the said GSPL. The facts of the GSPL case and the facts of the case in hand are totally different as has been already recorded by me. In my view if the services which are rendered by the pipeline laying contractors directly to appellant herein for laying the pipeline and other input services which are required for rendering of the service by the appellant, prima facie the Cenvat credit cannot be denied to the appellant; the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... contractors, other input services for commissioning of the pipelines prior to it being brought in use and of the duty paid on capital gods like valves, compressor pump, pipes. 4. Learned Counsel would take me through the order of the learned Member (Technical) and submits that the Hon'ble Member has incorrectly interpreted the judgement of the Tribunal in the case of GSPL. He would then take me though the said judgement of the Tribunal and submit that the issue was slightly different in that inasmuch, GSPL had given EPC contract to various contractors and the pipes were procured by the contractors and hence, the Tribunal upheld the denial of the Cenvat credit on duty paid on pipes as not available to the service provider, namely, GSPL. He would also take me through the findings recorded by the Tribunal as to the Cenvat credit of the services rendered by the service provider directly to the GSPL. He would submit that the judgment of the Tribunal is squarely covered the issue in their favour. He would then draw my attention to the exact amount as regards the Cenvat credit disallowed which I reproduced below: (i) On Services rendered by pipel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and there is also no dispute that contractors classification of service is not accepted. It is noted that there is no dispute that as to the fact that the pipeline system which is put in place by the contractors is used for rendering of out put services falling under the head of transport of goods (other than water) through the pipeline or conduit services . I find that the services rendered by the contractors for laying the pipeline is towards bringing into existence a system which is the back bone for rendering the services of the appellant. In my view the services rendered by the pipeline laying contractors would be eligible for Cenvat credit on the ratio of the law as has been laid down by the Hon'ble High Court in the case of CCE Vs. Sai Samhita Storages (P) Ltd. - 2011 (270) ELT 33 (AP). 7.1 As regards the Cenvat credit on other input services which are availed prior to commissioning of the pipeline in March 2009 which are in respect of consulting engineer services, rent-a-cab services, CHA services, BAS for coating pipes, supply of tangible goods services, I find that these services are rendered by the service provider for bringing into existence, pipeline through ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd that the views recorded by the Hon'ble Member (Judicial), that a case has been made out for the complete waiver of the demands, is a correct view and I concur with the same. 9. In my considered view, the appellants have made out a prima facie case for complete waiver of pre-deposit of the amounts involved. 10. Registry is directed to place this file before the bench for passing appropriate orders. Difference of opinion In view of the difference of opinion between Member (Judicial) and Member (Technical), the matter may be placed before the President to nominate Third Member to resolve the difference of opinion on the following points:- 1. Whether in the facts and circumstances of the case the applicant has made out a case for complete waiver of service tax on inputs, input services and capital goods used in laying down the pipeline which is used for transport of gas as held by Member (Judicial). OR Whether the appellants have not made out a case for complete waiver of service tax on inputs, input services (except input services received directly by the appellant) and capital goods used for erection of pipelines used for transportation of gas as held by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ne laying contractors and not by the applicant. Thereafter, the adjudication took place and it was held that laying pipeline by the contractors resulted in the creation of an immovable property, hence CENVAT Credit on inputs, input services and capital goods is not admissible till April 2009. Aggrieved by the said order, the applicant is before us seeking waiver of pre-deposit of the impugned demands. 3. Shri Vipin Kumar Jain, Advocate learned Counsel for the applicant submitted a copy of break up of the CENVAT Credit disallowed which is reproduced here-in-under:- (i) On Services rendered by pipeline laying contractors (CICS, ECIS, WCS) Rs.195.75 crores (ii) Other input services availed of prior to commissioning of pipeline in March 2009 (eg: Consulting Engineer services, Rent-a-cab Services, CHA services, BAS for coating pipes, Supply of tangible goods) Rs.42.60 crores (iii) Capital goods credit availed prior to commissioning of pipeline (valves, compressor pump, pipes-all specified capital goods) Rs.23.78 crores ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... een procured by the applicant and supplied to the pipeline laying contractor to lay pipeline on jobwork basis. Therefore, these are the inputs and capital goods for the applicant only. The adjudicating authority has relied on to deny CENVAT Credit on the case of GSPL (supra) but the facts in that case are not applicable to this case as in that case the contract was given by GSPL on turnkey basis. In our case, the contract was given only on the jobwork basis. 3.6 He further submits that denial of credit is barred by limitation as the credit which is being denied have been availed till March 2009 whereas the show-cause notice was issued on 21.10.2013. In these circumstances, he prays for waiver of pre-deposit of the entire demands be granted. 4. On the other hand, Shri V.K. Singh, learned Spl Counsel appearing for the Revenue opposed the contention of the learned Counsel and submits that the service tax paid by the contractor is for laying pipeline which is capital asset, therefore service tax paid by the contractors does not fall in the category of tax paid on capital goods, input and input services used in providing services. Transport of goods through pipeline or other cond ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... during pipeline laying by the pipeline laying contractor. As the agreement between the applicant and the pipeline laying contractors is limited for laying of the pipeline is only on jobwork basis. Therefore, the applicant being the owner of the said goods i.e. inputs and capital goods. 6.1 The learned Commissioner in the impugned order has relied on the decision of GSPL (supra) to say that the applicant is not entitled to take CENVAT Credit on inputs and capital goods as the same are used by the pipeline laying contractor and the same are inputs and capital goods for pipeline laying contractors. The fact in this regard in the said case is somehow different to the facts in hand. In the case of GSPL (supra) there was a trenchery contract between the pipeline laying contractors and GSPL, which is not in this case. In fact, from the ratio drawn by this Tribunal in a ROM application, it was clearly held by this Tribunal that whatever services have taken by the assessee directly from the service provider, the appellant is entitled to take CENVAT Credit. The same principle will applicable to this case also to inputs and capital goods as the same were directly availed by the applicants ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce for providing an output service. Therefore the definition of input and input service are pari material as far as the service providers are concerned. That being the position, the decision of the Hon'ble High Court of Andhra Pradesh would be applicable to the present case. In that case also, the Hon'ble High Court took the view that without use of cement and TMT bars for construction of warehouse assessee could not have provided 'storage and warehousing service.' In this case also, without utilizing the service, mall could not have been constructed and therefore the renting of immovable property would not have been possible. The issue involved is squarely covered by the decision of the Hon'ble High Court of Andhra Pradesh. Since the service tax demand itself is not sustainable, the question of imposition of penalty does not arise. The appeal is allowed with consequential relief to the appellants. In these circumstances, the appellant is entitled to take CENVAT Credit on the service tax paid by the pipeline laying contractors on the activity of laying pipeline on jobwork basis. 6.4 We further find that with regard to other input services namely Consulting ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent on the face of our order in paragraph No. 5.2. The said error is rectified by replacing paragraph No. 5.2 as indicated hereinabove by the following paragraph No. 5.2. The learned Special Counsel also submitted that in respect of services rendered to the contractor by other service providers, Notification No. 12/2003 does not disallow credit of service tax on such input services and therefore only contractors could have availed the credit. Therefore in such cases if the contractors did not avail the credit, appellant cannot avail. We find ourselves in agreement with this submission. It cannot be said that in respect of input services received by the contractors, appellant is eligible since those are not input services used for providing output service by the appellant but they are used for providing output service by the EPC contractors . It is also made clear that these findings would be applicable only in respect of eligibility of CENVAT Credit of service tax paid by provider for services provided to EPC contractors and may not be applicable to the services provided by the service providers directly to the assessee, in respect of Engineering Consultancy, inspection service ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssioning of pipeline in March 2009 (eg: Consulting Engineer services, Rent-a-cab Services, CHA services, BAS for coating pipes, Supply of tangible goods) Rs.42.60 crores (iii) Capital goods credit availed prior to commissioning of pipeline (valves, compressor pump, pipes-all specified capital goods) Rs.23.78 crores 3. Three questions need to be answered namely: (1) Whether cenvat credit of service tax paid by the pipeline laying contractors on Works Contract Service (WCS) provided for laying the pipeline is admissible to the appellant? (2) Whether input service credit on services such as design and engineering of the pipeline, GTA services, Rent-a-cab services, CHA services, business auxiliary services used in laying the pipeline is admissible to the appellant? (3) Whether service tax credit on inputs and capital goods such as valves, compressor pumps pipes etc. used in laying pipeline is admissible to the appellant. 3.1. We may understand the manner in which the pipeline was constructed. It is not in dispute that the construction of the pipeline was assigned to various contractors ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... above clearly states that the appellants could have availed Cenvat Credit on inputs or capital goods received by them or on any input service received by them, they being a service provider providing service of Transport of goods through pipeline or other conduit . But the pipeline erected by contractors and handed over to the appellant is neither an input nor an input service for the appellants. It is also not capital goods within the definition of capital goods as defined in Rule 2(a) of Cenvat Credit Rules which states that: In these rules, unless the context otherwise requires,- (a) capital goods means, - ...................... Used- (1) in the factory of the manufacturer of the final products, but does not include any equipment or appliance used in an office; or In terms of the above Rule, the pipeline system being immoveable property cannot be termed as goods used in the factory of manufacture of the final products . Therefore, the service tax paid by the contractors for laying pipeline system which is immoveable property does not fall in the category of service tax paid on either capital goods or inputs or input services for the appellants to provide their ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d any provision which allows them to take credit of duty paid on pipes and also service tax paid on construction of pipeline system. A conscious decision was made by the appellant and the EPC contractor to avail the benefit of Notification No. 12/2003 especially in the case of appellants, they had also taken a legal opinion. Once a choice is made the consequences of the chose also inevitably follows and has to be suffered. 3.2. As a matter of reiteration, I may state that the above judgement held that in the case of capital goods for service providers, they are required to be used for providing output service whereas the pipes are used for construction of pipeline by the contractors and the pipeline system which is immoveable property is handed over to the appellant. Similarly appellants are not using pipes for providing any output service. They have supplied pipes for construction of pipeline to the Contractor and again there is no provision which allows the appellant to take credit of service tax paid on the construction of the pipeline system, because, the pipeline system is not output service for the contractor. 3.3 Reliance on the case of Sai Sahmita is not correct becau ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erein Tribunal observed 6. The main thrust of the appellant's argument is that the definition of input as contained in Rule 2(k)(ii) is all goods used for providing any output service . It stands contended by them that any item which is required for the ultimate providing of the service, should be considered as an input. The expression used for providing should be construed as used for the purpose of providing . The expression for the purpose of business stands interpreted by the Hon'ble Supreme Court to be of wide import. As they have contended that jetty is used for providing port services and cement and steel in question are used for construction of such jetty. As such it has to be held that cement and steel stand used for providing the output services. We find that the definition of input is provided in Rule 2(k), in two different clauses i.e. (i) and (ii). Clause (i) refers to the definition of inputs for the purposes of excise duty whereas Clause (ii) refers to the definition of input for the purposes of service tax. When we compare the definition of inputs as contained in the said two clauses, we note the following differences; (a). the definition of input ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nting, auditing, financing, recruitment and quality control, coaching and training, computer networking, credit rating, share registry, and security, inward transportation of inputs or capital goods and outward transportation upto the place of removal; [but excludes],- As seen from the above definition, the inclusion clause does not help the appellant because it only allows services used in relation to setting up office etc. which are premises of the provider of output service. Whereas the service tax was paid by the Contractors under the Work Contract Service for construction of pipeline system. It may be emphasized again that the contractor paid service tax on the services provided by him and not on the pipeline system as such. 4. However as also held by the Tribunal in the case of Gujarat State Petronet Ltd. above, I agree that in respect of services provided by the service providers directly to the appellants, the credit would be admissible. 5. The appellants have also raised the issue of time bar stating that they addressed a letter dt. 28.7.2006 to the Assistant Commissioner informing him that they would be availing Cenvat Credit on all the inputs, capital goods a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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