VKJ Latest News Update

VKJ Law Offices of Vinay K. Jain Advocates & Solicitors

ST – Tax paid on CICS by sub-contractors is available as CENVAT to assessee providing same services: CESTAT

2019-TIOL-2423-CESTAT-ALL

IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL
REGIONAL BENCH, ALLAHABAD
COURT NO. I

Service Tax Appeal No. 70471 of 2017-Division Bench

Arising out of Order-in-Original No.26/COMISSIONER/NOIDA/2016-17, Dated: 31.03.2017
Passed by Commissioner of Service Tax, Noida

Date of Hearing: 18.06.2019
Date of Decision: 18.06.2019

M/s BHARAT HEAVY ELECTRICAL LTD
(POWER SECTOR-NORTHERN REGION)
(PLOT NO.25, SECTOR 16-A, NOIDA-201301, UP)

Vs

COMMISSIONER OF SERVICE TAX
NOIDA, (RENU TOWER, C-56/42, SECTOR-62, NOIDA, UP)

Appellant Rep by: Shri Shubham Agarwal, Adv. & Shri Abinash Ghosh, Deputy Manager
Respondent Rep by: Shri Pawan Kumar Singh, AR

CORAM: Archana Wadhwa, Member (J)
Anil G Shakkarwar, Member (T)

ST – The issue involved is as to whether the service tax paid on ‘Commercial or Industrial Construction Services’ by the sub-contractors would be available as credit to the assessee for further utilization in respect of same services provided by assessee – Admittedly, the assessee is covered by main blanket definition of input service in so far as he is utilizing the services of the sub-contractor for providing output services – Revenue’s reliance is on the exclusion clause – As per the said exclusion clause, certain services stand specified in clause (A) of the said exclusion, which would not be available for availing Cenvat credit, if the same are used for certain specified output services – However, the said exclusion clause does not stop there – There is further exception to the effect that such exclusion would not apply if the specified services are used for providing one or more of the specified services – This leads to a clear interpretation that if any of the specified excluded services stand utilized for providing one or more of the specified services, the exclusion would not apply – The various specified excluded services are in respect of ‘Architect Services’, ‘Port Services’, ‘Airport Services’, ‘Commercial or Industrial Construction Services’, ‘Construction of Residential Complex Services’ and ‘Works Contract Services’ – If the said services are used for construction of building or the laying of foundation or making of structures to support the capital goods, credit would not be available – However, further exception makes it clear that if the said services stand utilized for providing any of the services specifically excluded, the credit would be available – As per the settled principle of law, no word in legislation has to be ignored – The second exception carved out in first exception leads to make two negatives as positive and it has to be interpreted as the construction services used for further construction services have to be treated as an eligible input services – As such, the services of sub-contractors utilized for their output services of construction of power plant would be an admissible Cenvatable services – The demand stands raised by invoking extended period of limitation – The assessee being a Public Sector Undertakings cannot be saddled with any mala fide so as to justifiably invoke the longer period of limitation – Appeal is allowed on merits as also on limitation by setting aside the impugned order: CESTAT

Appeal allowed

FINAL ORDER NO. 71118/2019

Per: Archana Wadhwa:

After hearing both the sides duly represented by Shri Shubham Agarwal learned advocate appearing for the appellant and Shri Pawan Kumar Singh learned A.R. appearing for the Revenue, we note that the appellant is a ‘Public Sector Undertaking’ of Central Government and is engaged in setting up Power Plant for NTPC. They were awarded works contract for the said purposes and were duly registered with the Service Tax Department under the category of “Commercial or Industrial Construction Services”.

2. The appellant had sub-contracted a part of the construction activity to the sub-contractors who were paying service tax under the category of ‘Commercial or Industrial Construction Services’ and the appellant was availing the Cenvat credit of the same.

3. As a result of audit objection, the appellants were issued a show cause notice dated 19/10/2016 proposing to deny the Cenvat credit availed by the appellant during the period April, 2011 to September, 2015, on the ground that with the amendment of the definition of ‘Input Service’ with effect from 01/04/2011, the ‘Commercial or Industrial Construction Services’ stand excluded. The notice issued to the appellant stands culminated into the impugned order passed by the Commissioner of Service Tax confirming the tax to the tune of Rs.5,61,37,845/- and the denial of the Cenvat credit of Rs.12.28 lakhs in respect of Rent-a-Cab Services. The said denial of credit of tax paid on Rent-a-Cab Service stands already paid by the appellant and is not being challenged.

4. The short issue involved in the present appeal is as to whether the service tax paid on the ‘Commercial or Industrial Construction Services’ by the sub-contractors would be available as credit to the appellant for further utilization in respect of the same services provided by the appellant. For better appreciation, we reproduce the amended provisions of the definition of Input Services as below:-

W.E.F. 01.04.2011

‘Input Service’ means any service:-

(i) Used by a provider of taxable 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 includes services used in relation to modernization, renovationor 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 services, –

(A) Specified in sub-clauses (p) (zn), (zzl), (zzm), (zzq), (zzzh) and (zzzza) of clause (105) of Section 65 of the Finance Act (hereinafter referred as specified services), in so far as they are used for – (a) construction 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.”

5. As is seen from the above, the input services stand defined with inclusion clause as also exclusion clause. Admittedly the appellant is covered by the main blanket definition of input service in so far as he is utilizing the services of the sub-contractor for providing output services. Revenue’s reliance is on the exclusion clause. As per the said exclusion clause, certain services stand specified in clause (A) of the said exclusion, which would not be available for availing Cenvat credit, if the same are used for certain specified output services. However, the said exclusion clause does not stop there. There is further exception to the effect that such exclusion would not apply if the specified services are used for providing one or more of the specified services. This leads to a clear interpretation that if any of the specified excluded services stand utilized for providing one or more of the specified services, the exclusion would not apply. We note that the various specified excluded services are in respect of ‘Architect Services’, ‘Port Services’, ‘Airport Services’, ‘Commercial or Industrial Construction Services’, ‘Construction of Residential Complex Services’ and ‘Works Contract Services’ etc. If the said services are used for the construction of building or the laying of foundation or making of structures to support the capital goods, credit would not be available. However, further exception makes it clear that if the said services stand utilized for providing any of the services specifically excluded, the credit would be available. The Revenue’s contention is that the construction services used for construction of building, having been specifically excluded, would not be admissible input services.

We note that as per the settled principle of law, no word in the legislation has to be ignored. We cannot shut our eyes to the expression “except for the provisions of one or more of the specified services” appearing in the said exclusion clause. The second exception carved out in the first exception leads to make two negatives as positive and it has to be interpreted as the construction services used for further construction services have to be treated as an eligible input services. As such, we agree with the learned advocate appearing for the appellant that the services of the sub-contractors utilized for their output services of construction of power plant would be an admissible Cenvatable services.

6. Apart from above, we also note that the demand stands raised by invoking extended period of limitation. The appellant being a Public Sector Undertakings cannot be saddled with any mala fide so as to justifiably invoke the longer period of limitation. As such, we hold that the demand being barred by limitation is also liable to be set aside. In view of the foregoing discussions, appeal is allowed on merits as also on limitation by setting aside the impugned order.

(Dictated and pronounced in open court)

Leave a Reply

Close Menu
%d bloggers like this: