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Commissioner Central Excise Commissionerate, Delhi-III Versus M/s Bellsonica Auto Components India P. Ltd.

2015 (7) TMI 930 - PUNJAB & HARYANA HIGH COURT

CENVAT Credit - input services - inclusion part - Credit availed on Civil Construction service - inadmissible services or not - Held that:- If, the said services were not covered by Rule 2(l), it would not have been necessary to introduce the amendment. It is clear, therefore, that prior to the amendment the setting up of a factory premises of a provider for output service relating to such a factory fell within the definition of ‘input service’. The amendment of 2011 is not retrospective and is .....

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of a factory will be allowed as credit, even if they are assumed as not an activity relating to business as long as they are associated directly or indirectly in relation to manufacture of final products and transportation of final products upto the place of removal.

The Tribunal rightly did not agree with the Commissioner’s findings that the services in question had been used for brining into existence an immovable property and not for the manufacture of the final product. The said .....

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e and Service Tax Appellate Tribunal setting aside the order of the Commissioner disallowing the assessees/respondents Cenvat Credit in the sum of ₹ 1,45,32,300/- availed by them holding that it was availed on inadmissible services. The Commissioner ordered recovery of interest and also imposed a penalty of ₹ 1,45,32,300/-. The matter pertains to the period 2007-08 to 2009-10. 2. The appeal is admitted on the following substantial questions of law:- (i) Whether the Decision of the Tr .....

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vail the Cenvat Credit facilities as admissible in law. They manufacture metal-sheet components for motor vehicles which fall under heading No.87082100 of the Central Excise Tariff Act, 1985. The department during an audit in the year 2010 observed that the respondents had availed Cenvat Credit for service tax paid on civil work of constructing a plant/factory in the premises, namely, the manufacturing plant and for rental of the immovable property leased by them on which the plant is erected. 4 .....

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them. The respondents paid the service tax in respect of the lease rent. The respondents set up the factory for which they availed the service of erection, installation and commissioning engineers who had paid the service tax in respect of the amounts paid to them. The respondents availed Cenvat Credit in respect of the said service tax paid. 5. It was not contended before us that service tax was not payable. The only question is whether the said services fall within the meaning of the term inpu .....

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nd clearance of final products, upto the place of removal and includes services used in relation to setting up, modernization, renovation or repairs of a factory, premises of provider of output service or an office relating to such factory or premises, advertisement or sales promotion, market research, storage upto the place of removal, procurement of inputs, activities relating to business such as accounting, auditing, financing, recruitment and quality control, coaching and training, computer .....

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d services were not eligible for Cenvat Credit and accordingly issued show cause notice for recovery of the credit along with interest and for imposition of penalty. The Commissioner confirmed the demand along with interest and imposed penalty. The Commissioner held as follows. Though the definition of input service is wide, it does not cover services that remotely or in a roundabout way contribute to the manufacture of the final products; that any and every connection however remote and indirec .....

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tral excise duty. Immovable property is neither service nor goods . Input credit is not available to them. Commercial or industrial construction service or works contract service is an input service for immovable property which is neither subjected to central excise duty nor to service tax. In this regard, the Commissioner referred to a CBEC Circular dated 04.01.2008. The Commissioner also held that the service tax paid on lease rentals is not covered under the input service as the same is not r .....

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Amrinder Singh rightly analysed Section 2(l) by dividing it into two parts terming them the mean part and the includes part and that the present case would fall under both the parts of the definition as the phraseology is wide enough to cover the said services, the same being directly or indirectly or in any event in relation to the manufacture of the respondents final product. 8. The land was taken on lease to construct the factory. The factory was constructed to manufacture the final product. .....

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fore, falls within the first part of Rule 2(l) aptly referred to by Mr. Amrinder Singh as the means part . 9. The respondents case also falls within the second part of Rule 2(l) i.e. the inclusive part. The definition of the words input service also specifically includes the services used in relation to setting up of a factory. Mr. Amrinder Singh rightly contended that it was not the appellant s case that the services were not used for the setting up of the factory. The doubt in this regard is s .....

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udes services establish the same. It can hardly be suggested that the lease rental is not for the use of the land in relation to the manufacture of the final product. 10. This becomes clearer from the fact that by an amendment of the year 2011 to rule 2(l), construction services were excluded from the definition of input service . The amended section in so far as it is relevant reads as under:- (l) input service means any service, - (i) .. …. ….. (ii) (A) specified in sub-clauses ( .....

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in relation to commercial or industrial construction. Explanation.- For the purposes of this sub-clause, the construction of a new building which is intended for sale, wholly or partly, by a builder or any person authorised by the builder before, during or after construction (except in cases for which no sum is received from or on behalf of the prospective buyer by the builder or the person authorised by the builder before grant of completion certificate by the authority competent to issue such .....

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licable to the respondents case. 12. Our view is supported by the judgment of a Division Bench of the Bombay High Court in Coca Cola India Pvt. Ltd. vs. Commissioner of C. Ex., Pune-III, 2009 (242) E.L.T. 168 (Bom.). The Division Bench construed Section 2(l) as follows:- 39. The definition of input service which has been reproduced earlier, can be effectively divided into the following five categories, in so far as a manufacturer is concerned: (i) Any service used by the manufacturer, whether di .....

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puts, (v) Services used in relation to activities relating to business and outward transportation upto the place of removal; Each limb of the definition of input service can be considered as 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 of the input service would be available. This would be so even if the assessee does not satisfy other limb/limbs of the above definition. To illustrate, i .....

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