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TMI Blog2023 (11) TMI 719X X X X Extracts X X X X X X X X Extracts X X X X ..... Commissioner had also disallowed CENVAT credit of Rs. 13,94,172/- in respect of the show cause notice dated 26.04.2016 and CENVAT credit of Rs. 5,79,787/- in respect of the show cause notice dated 09.01.2017. The Commissioner (Appeals) has allowed the appeal filed by the department and has set aside the order passed by the Additional Commissioner allowing CENVAT credit to the appellant with a direction for recovery of Rs. 64,04,899/- with interest and penalty. 2. The appellant is a holder of Central Excise Registration and is engaged in the manufacture of various iron and steel products, such as Sponge Iron, M.S Ingots, H.B Wire. The appellant claims that it has been paying duty regularly and filing the returns. 3. The present dispute relates to input service credit availed by the appellant on the services availed by the appellant with respect to renovation, repairs and modernizations of its plant and machinery. The case of the department is that the said services relate to industrial and commercial construction services/work contract services pertaining to civil works and would not be 'input services' as defined under rule 2(1) of the CENVAT Credit Rules, 2004 [the CENVAT Rules] ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... art of the order that dropped the demand and the Commissioner (Appeals) confirmed the demand of Rs. 64,04,899/- with interest and penalty. 10. Shri Krishnamohan K. Menon, learned counsel assisted by Ms. Parul Sachdeva, appearing for the appellant made the following submissions: (i) The adjudicating authority had examined each transaction and document to identify the exact scope of the transaction and the use of the input service to separate what was permissible and what was not. The invoices, work orders and Chartered Engineers Certificates were examined before permitting a substantial portion of the credit and denying the remainder. The Commissioner (Appeals) made a blanket reversal in two paragraphs without giving any substantial reason, but merely reiterating that everything was civil work. In this connection, reliance has been placed on the following decisions of the Tribunal: (a) Salora International vs. Commissioner C. Ex., New Delhi [2010 (262) ELT 467 (Tri.-Del.)]; and (b) Himani Singh vs. Commissioner of Customs, Meerut [2010 (255) ELT 254 (Tri.-Del.)]. (ii) The services were used for modernization/renovation/repairs of plant and machinery in the factory in areas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... overed under the main definition but if they are covered by the exclusion clause, the appellant would be not eligible to avail CENVAT credit. 12. The submissions advanced by the learned counsel for the appellant and the learned authorised representative appearing for the department have been considered. 13. To appreciate the submissions, it will be appropriate to reproduce the definition of 'input service' under rule 2(l) of the Credit Rules, as it stood prior to 01.04.2011, from 01.04.2011 to 30.06.2012 and then w.e.f. 01.07.2012. Prior to 01.04.2011 "2(l) "input service" means any service,- (i) used by a provider of taxable service for providing an output service, or (ii) used by the manufacturer, whether directly or indirectly, in or in relation to the manufacture of final product and clearance of final products upon 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d training, computer networking, credit rating, share registry, security, business exhibition, legal services, inward transportation of inputs or capital goods and outward transportation upto the place of removal. but excludes- (A) service portion in the execution of a works contract and construction services including service listed under clause (b) of section 66E of the Finance Act (hereinafter referred as specified services) in so far as they are used for- (a) construction or execution of works contract of a building or a civil structure or a part thereof; or (b) laying of foundation or making of structures for support of capital goods, except for the provision of one or more of the specified services; or" (emphasis supplied) 14. It would be seen from the aforesaid definition of 'input service' in rule 2(l) of the Rules that while the 'means' part of the definition has continued to remain the same pre amendment or post amendment, but the 'includes' part and the 'excludes' part of the definition of 'input service' have underdone changes. Though 'services used in relation to setting up' of a factory was included in the inclusive part of the definition of 'input services ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oviders, description of the services provided, vendor's invoice no. and date, amount of service tax credit involved, total invoice value, purpose for which the services were used, summary sheet showing year-wise details of total service tax credit availed etc. Besides, they have also produced the copies of the relevant work orders and invoices on the strength of which the cenvat credit was taken by them for verification. They have also submitted additional submission in the matter where under they have produced details under Annexure A, B C etc. as explained above and also produced certificate dated 04.02.2019 of the Chartered Engineer who has certified the use of the services in question to defend their case." (emphasis supplied) 16. The Commissioner, thereafter, meticulously examined the services covered by the invoices and found that major part of the services were used in connection with the renovation of the pellat plant and, therefore, would not covered under the exclusion clause of the definition of the input service. The Commissioner also found that some of the services were covered by the exclusion clause and, therefore, the appellant would not be entitled to avail ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... x 23.5 However, on examining the use of services received under the cover of 03 invoices during year 2011-12 involving total cenvat credit of service tax of total Rs. 29,578/- and use of services received under the cover of 06 invoices involving cenvat credit of service tax of total Rs. 70,736/-, I find that they had used said services in connection with construction of RO water point and labour rest shelter, construction of partition wall, construction of parapet wall at rest centre, construction of speed breakers, construction at factory gate no.3, at main factory gate and dismental of civil structure. Such use of the taxable services in question is found to be covered under the exclusion clause of definition of the "input service" as defined under Rule 2 (1) of the Cenvat Credit Rules, 2004 and thereby I find that the Noticee were not entitled to avail cenvat credit of service tax of total Rs 1,00,314/-." (emphasis supplied) 17. Similar findings were recorded by the adjudicating authority in respect of the second show cause notice. 18. The Commissioner, however, while disallowing CENVAT credit to the appellant recorded the following findings: "10. From the about definitio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cluded from the definition of input service would not mean that any service used in relation to renovation or repairs of factory would stand excluded from the definition of input service. The exclusion part would cover constructions at the time of setting up of the plant and would not include the repairs or renovation works. 21. This issue stands decided in favour of the appellant by the Tribunal in M/s. Jai Balaji Industries Ltd. vs. Commissioner of Central Excise, Customs & Service Tax, Durgapur [Excise Appeal No. 76215 of 2016 decided on 04.08.2022] and the relevant portion of the decision is reproduced below: "16. We find that the definition of "input service" has an inclusion clause and an exclusion clause. The intention of the government could never have been to cover certain services in the inclusion part and at the same time cover them also in the exclusion clause. The cases cited by the learned advocate for the appellants support this view. The expression "modernisation, renovation or repairs of a factory" was appearing in the definition of "input service' both before and after 01.07.2012. It has not been denied by the department that the Coke Oven Project of the appell ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... factory is admissible as input service which is the direct case of the appellant. (emphasis supplied)..." 18. In the above decision reliance was placed on the earlier decision in the case of Ion Exchange (I) Ltd. Vs. Commissioner of C. Ex., Cus. & S.T., Surat-II [2018 (12) G.S.T.L. 302 (Tri. - Ahmd.)] wherein it was held as under:- "8. A plain reading of the said provisions makes it clear that service utilized in relation to modernization, renovation and repair of the factory are definitely fall within the meaning of 'input service' even though; construction of a building or civil structure or part thereof has been placed under exclusion clause of the said definition of 'input service'. After amendment to the definition of the 'input service', a clarification issued by the Board vide Circular No. 943/4/2011-CX, dated 29-4-2011 whereunder answering to the questions raised on the eligibility of credit of service tax paid on construction service as an 'input service' used in modernization, renovation or repair, it has been clarified that the said services being provided in the inclusive part of definition of 'input service' are definitely e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ice, accordingly, the Cenvat credit is admissible. The impugned order is set aside and the appeal is allowed." 21. Further, the Board itself in Circular No. 943/4/2011-CX, dated 29-4-2011 has clarified as under:- 4. Is the credit of input services used for repair or renovation of factory or office available? Credit of input services used for repair or renovation of factory or office is allowed. Services used in relation to renovation or repairs of a factory, premises of provider of output service or an office relating to such factory or premises, are specifically provided for in the inclusive part of the definition of input services. 22. In view of the above the Appellants have correctly taken credit of service tax paid/borne in respect of all services which were used for the Coke Oven Project as part of the modernization/renovation plan of the existing plant/factory." (emphasis supplied) 22. In view of the aforesaid decision of the Tribunal rendered in Jai Balaji Industries, the order passed by the Commissioner (Appeals) denying the CENVAT credit to the appellant merely for the reason that though the services that had been rendered were renovation or repair services whi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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