VKJ Latest News Update

VKJ Law Offices of Vinay K. Jain Advocates & Solicitors

CX – CENVAT – Rule 2(l) of CCR, 2004 – Services of land use, topographical survey and consultancy of environment are Input Services for setting up of a factory: CESTAT

2019-TIOL-2063-CESTAT-CHD

IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL
SCO 147-148, SECTOR 17-C, CHANDIGARH – 160017
SINGLE MEMBER BENCH
COURT NO. I

Appeal No. E/61429/2018

Arising out of Order-in-Appeal No. OIA-APPL-CE-PKL-46-2018, Dated: 21.05.2018 
Passed by the Commissioner of Central Excise (Appeals), Panchkula

Date of Hearing: 14.02.2019
Date of Decision: 14.02.2019

M/s NUVOCO VISTAS CORPORATION LTD

Vs

COMMISSIONER OF CENTRAL EXCISE AND SERVICE TAX
PANCHKULA

Appellant Rep by: Shri Naveen Bindal, Adv.
Respondent Rep by: Shri G M Sharma, AR

CORAM: Ashok Jindal, Member (J)

CX – Whether the assessee is entitled to avail Cenvat Credit on the services, namely, change of land use, topographical survey and consultancy of environmental issue which were used for setting up of a factory after amendment in Rule 2(l) of CCR, 2004 w.e.f. 01.04.2011 – Although the services of setting up of a new factory has been excluded from inclusive part of definition and particularly excluded the service portion of execution of works contract and construction services which includes A construction execution of works construction building for civil construction or lying the foundation or making the structure for support of capital goods – It does not mean that the other services used for setting up for a new factory, the credit is not available – In fact, the input service is defining two parts A is means part and B is inclusive part – In the mean part, it is mentioned that any service used by a manufacturer in relation to manufacture of final product and clearance thereof, whether it is directly or indirectly – The service in question has been used by assessee for setting up of a factory and without setting up of the factory the assessee is not able to manufacture their final product – In that circumstances, the services used by assessee are the part of means part of the definition of input service – Moreover these services have not been excluded from the definition of input service specifically – The said observation of Tribunal have taken support from the decision of Punjab & Haryana High Court in case of M/s Bellsonica auto components India P. Ltd. – Assessee is entitled to avail Cenvat credit for the services namely change of land use, topographical survey and consultancy of environment services: CESTAT

Appeal allowed

Case laws cited:

Commissioner of C.Ex. Vs. Bellsonica auto components India p. Ltd. 2015 (40) S.T.R. 41 (P & H)… Para 3

M/s Shakti Met Dor Ltd. Vs. Commissioner of C.Ex., Cust. & S.T., Hydrabad-IV 2017 (3) G.S.T.L. 152 (Tri.-Hyd.)… Para 4

M/s Musaddilal Projects Ltd. Vs. Commissioner of C.EX., Cus. & S.T., Hyderabad-I – 2017-TIOL-2304-CESTAT-HYD… Para 4

Infosys Ltd. Vs. Commissioner of Service Tax, Banglore – 2014-TIOL-409-CESTAT-BANG… Para 4

FINAL ORDER NO. 60136/2019

Per: Ashok Jindal:

After hearing the parties the issue emerges for consideration of this Tribunal is that whether the appellant is entitled to avail Cenvat Credit on the services, namely, change of land use, topographical survey and consultancy of environmental issue is entitled to avail Cenvat credit which were used for setting up of a factory after amendment in Rule 2(l) of Cenvat Credit Rules 2004, w.e.f. 01.04.2011 or not?

2. The facts of the case are that to set up their factory for manufacture of cement, the appellant availed the services of change of land use, topographical survey and consultancy of environmental issue, on these services, the appellant paid service tax and availed Cenvat credit in terms of Rule 2(l) of Cenvat credit Rules 2004, the Cenvat credit sought to be denied on the ground that post 01.04.2011, the appellant is not entitled to avail Cenvat credit for the services of used for setting up a new factory, therefore, they are not entitled to avail Cenvat credit and after issuance of the show cause notice the Cenvat credit was denied. Consequently, the demand was raised along with interest and the penalty was also imposed. The said order is under challenged before me.

3. The ld. Counsel for the appellant submits that all these services has been used by the appellant for manufacture of their final product and clearance thereof, therefore, they are entitled to avail Cenvat credit in terms of Rule 2(l) of Cenvat Credit Rules, 2004, he also took support from the order of the Hon’ble High Court of Punjab & Haryana in the case of Commissioner of C.Ex. Vs. Bellsonica auto components India p. Ltd. reported in 2015 (40) S.T.R. 41 (P & H).

4. The arguments advance by ld. Counsel for strongly opposed by Ld. AR and submits that post 2011 the service namely setting up a new factory has been taken up from the definition of input services in terms of Rule 2(l) of Cenvat Credit Rules, 2004, therefore, the appellant is not entitled to avail Cenvat credit, he also relied on the various decisions of the Tribunal namely, M/s Shakti Met Dor Ltd. Vs. Commissioner of C.Ex., Cust. & S.T., Hydrabad-IV reported in 2017 (3) G.S.T.L. 152 (Tri.-Hyd.), M/s Musaddilal Projects Ltd. Vs. Commissioner of C.EX., Cus. & S.T., Hyderabad-I reported in 2017 (4) G.S.T.L 401 (Tri.-Hyd.) = 2017-TIOL-2304-CESTAT-HYD, Infosys Ltd. Vs. Commissioner of Service Tax, Banglore reported in 2015 (37) S.T.R. 862 (Tri.-Bang.) = 2014-TIOL-409-CESTAT-BANG.

5. Heard the parties.

6. On consideration of the issue as per Rule 2(l) of Cenvat Credit Rules, 2004, the amendment took place w.e.f 01.04.2011, the same is expected here below for better appreciation:-

[(1) “input service” means any service,-

(i) used by a provider of [output service] for providing an output service; or

(ii) used by a manufacturer, whether directly or indirectly, in or in relation to the manufacture of final products and clearance of final products upto the place of removal,

and included services used in relation to 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, accounting, auditing, financing, recruitment 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 upto the place of removal;

[but excludes],-

[(A) service portion in the execution of a works contract and construction services, including services 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 the specified services; or]

on going through the above said definition, I find that although the services of setting up of a new factory has been excluded from inclusive part of the definition and particularly excluded the service portion of execution of works contract and construction services which includes A construction execution of works construction building for civil construction or lying the foundation or making the structure for support of capital goods. It does not mean that the other services used for setting up for a new factory, the credit is not available. In fact, the input service is defining two parts A is means part and B is inclusive part. In the mean part, it is mentioned that any service used by a manufacturer in relation to manufacture of final product and clearance thereof, whether it is directly or indirectly. The service in question has been used by the appellant for setting up of a factory and without setting up of the factory the appellant is not able to manufacture their final product. In that circumstances, the services used by the appellant are the part of the means part of the definition of input service. Moreover these services have not been excluded from the definition of input service specifically. The said observation of this Tribunal have taken support from the decision of the Hon’ble Punjab & Haryana High Court in the case of M/s Bellsonica auto components India P. Ltd. (Supra) wherein the High Court has observed as under :-

7. We are entirely in the agreement with Mr. Amrinder Singh’s submission on behalf of the respondents, that the Cenvat credit taken of the tax paid in respect of the said input services can be utilized by the respondents in accordance with the Cenvat Credit Rules. Mr. 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. The land and the factory were required directly and in any event indirectly in or in relation to the manufacture of the final product and for the clearance thereof up to the place of removal. But for the factory the final product could not have been manufactured and the factory needed to be constructed on land. The land and the factory are used by the manufacturer in any event indirectly in or in relation to the manufacture of the final product, namely, metal-sheets. The respondents’ case, therefore, fall within the first part of Rule 2(l) aptly referred to by Mr. Amrinder Singh as the “means part.”

7. Further, I am not in agreement with the decision placed before me by the Ld. AR for denial of Cenvat credit as in all these decisions, this Tribunal has not examined the issue of means part of the definition of input service, moreover have not considered the decision of the Hon’ble High Court of Punjab & Haryana in the case of M/s Bellsonica auto components India p. Ltd. (Supra).

8. Further, I am duty bound to follow the decision of the jurisdictional High Court in the case of M/s Bellsonica auto components India p. Ltd. (Supra), therefore, in my considered opinion, the appellant is entitled to avail Cenvat credit for the services namely change of land use, topographical survey and consultancy of environment services.

9. In these terms, I set aside the impugned order and allow the appeal with consequential relief, if any.

(Order dictated and pronounced in the court)

Leave a Reply

Close Menu
%d bloggers like this: