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2016 (6) TMI 1000 - CESTAT HYDERABAD

2016 (6) TMI 1000 - CESTAT HYDERABAD - 2016 (45) S.T.R. 92 (Tri. - Hyd.) - Cenvat credit - eligible input services - works contract service - whether appellant is eligible for credit on certain works contract service during the period April 2011 to December 2012. - the works carried out in the factory by appellant for which service tax was paid under the category of works contact service. It is submitted that in line with the business requirements, the appellant made certain changes in the produ .....

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ed - decided in favor of assessee. - Cenvat Credit on works contract service of fabrication of pipelines, erection of cooling tower and laying foundation - Held that:- The works contract service in relation to building, civil structure, laying of foundation etc. has been brought within the ambit of exclusion to exclude not only setting up but something more. - The credit availed on services used for laying foundation of tank/cooling tower is disallowed. - Decided partly in favor of asses .....

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llants availed credit for an amount of ₹ 1,36,352/- on services like works contract service which according to department was not admissible. A show cause notice was issued to appellants and after due process of law, the original authority vide order dated 30.12.2013, allowed credit of ₹ 1,24,954, disallowed credit of ₹ 7,246 confirming demand and recovery of this amount along with interest besides imposing penalty of ₹ 3623/. The department filed appeal before the Commis .....

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od April 2011 to December 2012. 3. On behalf of the appellant the learned counsel Shri Karan Talwar explained the works carried out in the factory by appellant for which service tax was paid under the category of works contact service. It is submitted that in line with the business requirements, the appellant made certain changes in the production process, factory layout, and made improvements to the existing facilities to increase volume of production and also to improve quality of the product. .....

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rs for carrying out works as under : - a) Expansion of capacity of Effluent Treatment Plant (ETP) from existing 160KLD to 250 KLD; credit involved is ₹ 37389/- b) Epoxy coating to the floor/flooring works; credit involved is ₹ 63,873/- c) Fabrication of pipe lines, erection of cooling tower and laying foundation for new cooling tower; credit involved is ₹ 927/- 4. It is submitted that the original authority allowed credit on the service tax paid for works contract services of t .....

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ed by department, the Commissioner (appeals) held that these works fall within the exclusion portion of the definition. 5. The learned counsel drew attention to the definition of input service as it stood prior to 1.04.2011, and also after 1.4.2011 to 30.06.2012 and the definition w.e.f. 01.07.2012. The definitions are noticed as under for better appreciation. 1. Definition of input service upto 31-3-2011 :- Rule 2(I) - Input service means any service (i) used by a provider of taxable service fo .....

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ement of inputs, activities relating to business, such as accounting, 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. After 01.04.2011 to 30.06.2012, the definition is as under- Input service means any service - (i) used by a provider of taxable service for providing an output service; or (ii) used by .....

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and quality control, coaching and training, computer networking, credit rating, share registry, security, business exhibition, legal services, inward transportation of inputs or capital goods and outward transportation up to the place of removal; but excludes services, - (A) sppcified in sub clauses (p), (zn), (zzl), (zzm), (zzq), (zzzh) and (zzzza) of clause (105) of Section 65 of the Finance Act (hereinafter referred as special services), in so far as they are used for - (a) construction of a .....

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ded in relation to outdoor catering, beauty treatment, health services, cosmetic and plastic surgery, membership of a club, health and fitness centre, life insurance, health insurance and travel benefits extended to employees on vacation and such as leave or home travel concession, when such services are used primarily for personal use or consumption of any employee. 6. The argument advanced for the appellant is that the works undertaken do not fall in the exclusion portion of the definition of .....

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is submitted by the counsel for appellant that this exclusion portion is pari materia to the words setting up which was deleted from the definition. Form 01.04.2011 upto 30.06.2012 the exclusion part dealt only with specified services as listed therein so far as they are used for construction of building or civil structure or part thereof or laying of foundation. That when credit became not admissible for services relating to setting up of factory, the exclusion portion to be in pari materia to .....

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rt of the definition. That such works would fall in the exclusion portion only if the construction works are in respect of new building, civil structure, foundation etc. 7. It is urged by counsel that after amendment w.e.f. 01.07.2012, the specified services mentioned in the exclusion part of the definition is confined to clause (b) of 66 E of the Finance Act, 1994. This was due to introduction of negative list in 2012. In all other respects, the exclusion part of the definition remained the sam .....

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r execution of works contract service in regard to new building, new civil structure or new foundation only. 8. Again since the inclusive part takes in services used in relation to modernisation, renovation or repairs of factory, if the exclusion part is interpreted in such a way so as to exclude every works contract services in regard to building, civil structure or part thereof, laying of foundation, making of support structures of capital goods etc; then it would make the inclusive part with .....

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together with the exclusion part of the definition, what is excluded can be only works contract service with regard to new building, new civil structure, laying of new foundation etc. 9. The learned Counsel drew attention to the definition of works contract service contained in section 65(105) (zzzza), as it stood prior to 01.07.2012 and thereafter [Section 65 B (54)]. The second sub clause of the definition (such contract is for the purpose of carrying out-) has five limbs. The first limb deal .....

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ounsel submitted that though the word new is not mentioned in the exclusion part of the definition of input service, this would go to show that exclusion part in the input service definition is only with regard to works contract service of new building or new civil structure or laying of new foundation and not any works contract service of existing building, civil structure or foundation. 10. Another argument put forward by the counsel is that the works done by the appellant are merely works don .....

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tion and credit cannot be disallowed. 11. To press his arguments, various judgments were relied. The strong argument advanced is that if the works contract service mentioned in the exclusion part of the definition of input service if not confined to works undertaken for new building, new civil structure, or laying of new foundation, the words modernisation, renovation, repairs contained in the inclusion part would be nugatory. The counsel drew support from the dictum laid in the case of Borossil .....

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le Apex Court noted as follows : 14. … … The cardinal rule of construction of the provisions of a section with a proviso is succinctly stated in Maxwell s interpretation of Statutes, 10th Edn., at page 162 thus: The proper course is to apply the broad general rule of construction, which is that a section or enactment must be construed as a whole, each portion throw in light if need be on the rest. The true principle undoubtedly is, that the sound interpretation and meaning of the s .....

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e of Coca Cola India Ltd. Vs. CCE [ 2009-TIOL-449] to canvass the argument that service tax in India is levied on destination cum consumption principle. That therefore the service tax paid on input service consumed by assesse which have formed part of price of product, if denied credit, would defeat the purpose of the legislation of CENVAT Credit. The judgment of the Tribunal in the case of Sri Chaithanya educational Committee [SCEC] Vs CCE & ST, Guntur was quoted by the counsel. Para 80 of .....

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t of the definition makes it very clear as to what is excluded. It offers no ambiguity. The words in the exclusion portion being very clear, it cannot be said that only works contract services in regard to construction of new building, new civil structure, or laying new foundation alone is excluded. The service portion of works contract and construction services in so far as they are used for construction of building, civil structure or foundation whether new or existing is excluded. What is all .....

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rks are as follows : (a) Expansion of capacity of Effluent Treatment Plant (ETP) from existing 160KLD to 250 KLD; credit involved is ₹ 37389/-, (b)Epoxy coating to the floor /Flooring works; credit involved is ₹ 63,873/- (c) Pipe & valve fittings, erection of cooling tower and foundation works; credit involved is ₹ 927/-. Out of these, the first and second works on bare perusal, do not fall in the exclusion part of the definition of input service, as these works are not con .....

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fore are eligible for credit. I hold that appellant is eligible for credit of ₹ 37,389/- & ₹ 63,873/-. 16. The issue remaining to be addressed is whether appellant is eligible for credit of ₹ 927/- being the service tax paid towards works contract service of fabrication of pipelines, erection of cooling tower and laying foundation. Though as per table contained in records this amount is seen clubbed with other amounts relating to works of fabrication of pipelines, fixing of .....

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k was for repair of existing foundation to erect the new cooling tower. I am not able to accept this contention. The exclusion portion expressly states that works contract service so far as they relate to construction of building, civil structure or par thereof, or laying of foundation or support for capital structures are not eligible for credit. The counsel has referred to the meaning of works contract service given in Section 65 (105)(zzzza) to support his arguments. I am not able to persuade .....

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d to be excluded by the Parliament is the service portion of works contract services insofar as it relates to construction of building, civil structure or part thereof or laying foundation or works of support structure to capital goods. This cannot mean that such works are to be in respect of new building, new civil structure, new foundation etc., because the inclusive portion already contains the words, renovation, modernisation and repair. For eg. - If a building inside factory is totally demo .....

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Moreover, if we look at the definition of input w.e.f.01/04/2011 in Rule 2(k) of CENVAT Credit Rules, 2004, as per clause (B) of the definition it excludes, any goods used for construction or execution of works contract of a building or a civil structure or part thereof; laying of foundation or making of structure for support of capital goods. If the Parliament had intended to confine the exclusion only to new buildings, new civil structure, new foundation, new support for capital goods, then i .....

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