Referring to the CENVAT Credit Rules, 2004, which exclude only a specific type of works contract which is in the nature of works contract/construction of civil structure building, as well as construction of support structure for capital goods, the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT), Bangalore, has ruled that the activities undertaken by the cement manufacturer (appellant) is ‘works service contract’ and not for ‘construction of building or civil structure’. Accordingly, the Tribunal allowed the CENVAT credit and quashed the service tax demand and penalty.
As regards the allegation of ineligible CENVAT credit availed by the appellant on lease premium, the CESTAT found that since the disputed services were ultimately meant for accomplishing the objective of providing the output service, it cannot be said that since the phrase ‘setting up’ was specifically excluded in the inclusive part of definition of input service, the benefit of CENVAT credit should be denied.
The Division Bench comprising P.A. Augustian (Judicial Member) and Pullela Nageswara Rao (Technical Member) observed that the appellant has availed Cenvat credit of Rs. 90,716 in respect of Service Tax paid on the invoice issued by Bigtree Advertising and Media Communications Pvt Ltd., towards expenditure that has been incurred for conducting a business meeting at the appellant’s plant in Cochin.
The Bench therefore held that the appellant is eligible to avail the credit of service tax paid on the event management services utilised for organising various events for prospective clients/employees.
As regards CENVAT credit of Rs. 1.21 lacs availed by the appellant on the ISD invoices issued in respect of services availed by the Regional marketing offices, the Bench found that the payment of service tax and the credit was taken by ISD office at Bangalore and thereafter said ISD office who, undisputedly, has borne the incidence of tax has distributed CENVAT Credit to the appellant.
Thus, the CENVAT credit pertains to the service tax paid by the marketing office of the Appellant in respect of input services used for marketing of the final product, and it is in relation to the manufacture of the final product, added the Bench.
As regards demand against ineligible CENVAT credit of Rs. 36.97 lacs, the Bench observed that without the very same services, the appellant cannot undertake the manufacturing process, and therefore, the services availed by the appellant have a direct nexus with the manufacturing activities undertaken by the appellant.
Briefly, the appellant, a manufacturer of cement, which had started the activity of packing cement in Cochin in October 2015, went through multi location Audit by the ADGA, and it was opined that the appellant had not paid the central excise duty correctly for the MRP-based clearances and also availed ineligible CENVAT Credit of input services. During the course of the audit, the appellant paid the alleged short payment and reversed the amount in the CENVAT account. However, it has not paid interest or penalty on the short payment.
Further, it was alleged that the appellant had availed ineligible CENVAT credit of input services on the strength of invoices issued by service providers and started utilising this credit for the payment of central excise duty for the clearance made from October 2015 onwards. Further, out of the total amount of Rs. 6.54 Crores of ineligible CENVAT credit, an amount of Rs. 6.18 Crores pertains to the service tax paid on the upfront charges for the lease rent of land taken from Cochin Port Trust for setting up a factory in Willingdon Island. Since the said credit was taken while setting up the unit, alleging various omissions, show cause notices were issued, and the Adjudication authority confirmed the demand.
Appearances:
Advocate Meghna Lal and Vani Dwevedi, for the Appellant/ Taxpayer
AR, Rajashekhar. B. N. N, Superintendent, for the Respondent/ Revenue
