SERVICE TAX Appeal No. 10310 of 2021-SM
[Arising out of Order-in-Original/Appeal No VAD-EXCUS-002-APP-211-2020-21 dated
25.02.2021 passed by Commissioner of Central Excise, Customs and Service Tax
VADODARA-II]
Gujarat Chemical Port Limited
VERSUS
Commissioner of Central Excise & ST, Vadodara-II
APPEARANCE :
Ms. Dimple Gohil, Advocate for the Appellant
Shri Vijay G Iyengar, Superintendent (AR) for the Revenue.
CORAM: HON’BLE MR. RAMESH NAIR, MEMBER (JUDICIAL)
DATE OF HEARING : 02.02.2023
DATE OF DECISION: 06.02.2023
FINAL ORDER NO. A/10199 / 2023
RAMESH NAIR :
The issue involved in the present case is that whether the appellant is
entitled for Cenvat credit in respect Management & Business Consultant
service and Technical Inspection and certification service availed for the
purpose of proposed additional Jetty to be constructed adjacent to the
existing Jetty. The department has denied Cenvat credit on the ground that
said services were used in connection with construction of a new Jetty which
fall under the ‘setting up’ of the project which is excluded as per the
exclusion clause in the definition of Input Services under Rule 2(l) of Cenvat
Credit Rules, 2004.
Ms. Dimple Gohil, learned Counsel appearing on behalf of the appellant
submits that the services in question were used by the appellant for
expansion of existing Jetty and not for setting up of a new Jetty. Therefore,
even though setting up of a new building or construction is excluded from
the definition of Input Service, still the appellant is entitled for Cenvat credit.
She placed reliance on the judgments:-
(a) Piramal Glass Limited vs. CCE & ST, Vadodara – 2019 (10) TMI
1032 – CESTAT Ahmedabad
(b) Manaksia Coated Metals & Industries Limited vs. CCE, Kutch
(Gandhidham) – 2018 (1) TMI 821-CESTAT Ahmedabad
(c) Unique Chemicals vs. CCE & ST., Vadodara-II – 2019 (8) TMI 200
– CESTAT Ahmedabad
(d) Nuvoco Vistas Corporation Limited – 2019 (2) TMI 1292-CESTAT
Chandigarh
(d) BASF vs. CCE & ST, Vadodara – Final Order No. A/12234-
12235/2022
Shri Vijay G Iyengar, learned Assistant Commissioner (AR) appearing
on behalf of the Revenue reiterates the findings of the impugned order.
I have carefully considered the submissions made by both the sides
and perused the record. Revenue has denied Cenvat credit on Management
& Business Consultant service and Technical Inspection and certification
service only on the ground that these services were used in respect of
‘setting up’ of a new Jetty. From the facts it is undisputed that the appellant
already had Jetty in operation and they proposed to construct one more
Jetty adjacent to the existing Jetty. In this case it cannot be said that the
appellant are setting up altogether a new Jetty. The additional Jetty is
nothing but expansion of the existing Jetty. Therefore, the expansion,
renovation or modernization of existing jetty, construction is still covered in
inclusion clause of definition of Input Service under Rule 2(l) of Cenvat
Credit Rules, 2004. On this issue, this tribunal has decided the matter in
following judgments:-
(a) In the case of Piramal Glass Limited (supra), this Tribunal passed
the following order:
“4.
I have heard both the sides and perused the record, I find that there is no
dispute that the appellant have an existing manufacturing factory wherein many other
plants and machinery and two furnace were already setup and with the said existing
facility, the appellant are manufacturing excisable goods for last many years. For
enhancing their production, the appellant sot up a new furnace, it cannot be said that
they have setup a new factory it is merely an expansion of the existing factory and
therefore, even if the term “setting up’ of factory is removed from the inclusion clause
of definition of input service, it does not adversely affect the appellant to avail Cenvat
credit on various services. Moreover, as per the amendment in Rule 2(l) of Cenvat Credit
Rules, 2004 certain services were excluded from the definition of Input Service and only
those services were not be eligible for Cenvat credit. On careful perusal of the exclusion
clause, do not find the services in question in the present case, fall under the exclusion
clause. For this reason, the appellant’s claim for availment of Cenvat credit cannot be
rejected.
- 5.
The very same issue has been considered by the Tribunal in the case of
Shiruguppi Sugar Works Limited (supra) wherein in identical facts, the Tribunal has
allowed Cenvat credit. The relevant portion of the order is reproduced:-
“6. After considering the submissions of both the parties and perusal of the
material on record, I find that the appellant have availed the credit on of
machinery, which is used for manufacture of sugar. Further, I find that these
impugned services fall in the definition of input service even after 1.4.2011.
Further, I find that in the case of Uni Abex Alloy Products (supra), this Tribunal
has held that it is a settled low that CENVAT credit is available if the impugned
services are used in or in relation to the manufacture of final products and if the
nexus of such services with the manufacture is established Further, I find that it
has consistently been held by the Hon’ble Supreme Court that the words in
relation to manufacture have been used to widen and explain the scope, meaning
and content of the definition and applying the same ratio, CENVAT credit of
service tax paid on input services is admissible so far as input services have been
used directly or in directly, in or in relation to the manufacture of final product
even if the term selling up has been deleted from the inclusive portion of the
definition Similarly, in the case of Birla Corporation Limited vs. Commissioner-
2014 (34) STR 589, CENVAT credit on erection, commissioning and installation
services have been allowed Therefore, by following the ratio of the decisions cited
supra, I am of the considered view that denial of CENVAT credit on erection,
commissioning and installation of machinery is not sustainable in law. Therefore,
I set aside the impugned order by allowing the appeal of the appellant. Once I am
allowing the appeal of the appellant on merit, I am not required to go into the
question of limitation.”
In the above decision of the Tribunal, it was correctly interpreted that even if the
term “setting up of factory” is removed, eligibility of Cenvat credit has to be ascertained
in view of the main clause of the definition according to which all the services used in or
in relation to the manufacture of final product, directly or indirectly are input service. In
the present case, installation of new furnace is directly used in relation to manufacture
of final product. Therefore, even as per the main clause of the definition of the input
service, these services are input services and credit is rightly availed by the appellant.
As regards the decision relied on by the Id. AR, find that firstly, this judgment is
for the period prior to 01.04.2011 and secondly, all the services were used for setting up
of a new factory. Therefore, the facts of Liugong Indian Pvt. Limited (supra) case are
different from the facts of the present case.
As per my above discussion, the impugned order is set-aside and the appeal is
allowed.”
(b) In the case of Manaksia Coated Metals & Industries Limited
(Supra), it was held:
“5.
On careful consideration of the submissions made by the Ld DR and on perusal of
records, I find that the issue is regarding eligibility of Cenvat Credit of the Service Tax
paid by the service providers under professional services as regard charges for
expansion of production capacity. It is noticed from the OIO that the appellant herein
has been taking a stand that these services were in regard to the expansion/renovation
work being carried out by the appellants at Kutchh plant. On such categorical assertion
made before the Adjudication Authority, I find that the Adjudicating Authority has gone
in tangent and recorded that the said services which are rendered are not for the
upcoming Galvanized Plant which is of expansion plant. The same views has been
expressed First Appellate Authority in the impugned order. In my considered view the
definition of the input services as enshrined in Rule 2(l) of the Cenvat Credit Rules, 2004
needs to be read.
“(l) 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 modernisation, 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 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; or5
Service Tax Appeal No. 10310 of 2021-SM
(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
(B)
specified in sub-clauses (d), (o), (zo) and (zzzzj) of clause (105) of section
65 of the Finance Act, in so far as they relate to a motor vehicle except when used
for the provision of taxable services for which the credit on motor vehicle is
available as capital goods; or
(C)
such as those provided 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 such as Leave or Home Travel Concession, when such
services are used primarily for personal use or consumption of any employee;?;
It can be seen from the above definition, the services which are used in
modernization, renovation, repairs of the factory Service Tax credit can be availed. It is
not clear from the records as to how both the authorities have come to a conclusion
that the said expansion/renovation is not covered under the definition of the input
service and especially under modernization/ renovation or repair of the factory It can
not disputed that the services rendered by the service provider in the factory premises
of the appellant and the services hired were used for the reasons mentioned for.
In view of the fore going, I find that both the lower authorities were in error in
rejecting the claim of the appellant as to eligibility to avail cenvat credit.
In view of the foregoing, I hold the impugned order is unsustainable and liable to
set aside and I do so.
The impugned order is set aside and the appeal is allowed.”
(c) In the case of Unique Chemicals (Supra) this Tribunal observed as
under:
“4. I have carefully considered the submissions made by both the sides and perused the
records. I find that the ground for denial of the cenvat credit by the lower authority is
that since “setting up” has been removed from the inclusion clause of definition, the
credit in respect of setting up of the factory is not admissible. As per the facts of the
present case, the factory is already existing and running its production, it is only
expansion of existing production capacity, therefore, it cannot be said that there is
setting up of the new factory. Moreover, the services were not excluded in the exclusion
category as brought in definition of input service w.e.f. 01.04.2011. Therefore, all the
services were used in or relation to the manufacture of final product as the expanded
production capacity is only for manufacture of final product. The judgment cited by the 6
appellant supporting their case, accordingly, I do not agree with the lower authority,
hence, the impugned order is set aside. Appeal is allowed.”
In view of the above judgments, a consistent view was taken by this
Tribunal that even though setting up of a new factory, construction of
building of service provider is not excluded from the definition of Input
service. In this case the construction of Jetty is clearly in the nature of
expansion of existing Jetty therefore, credit is clearly admissible.
Accordingly the impugned order is set-aside and the appeal is allowed.
(Pronounced in the open court on 06.02.2023)
(Ramesh Nair)
Member (Judicial)
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