Services utilized for setting up of factory which were availed prior to commencement of Production is Input Service: CESTAT allows Cenvat Credit on Input Services

The New Delhi Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT), allowed Cenvat Credit on input services and observed that the services utilized for setting up of factory which were availed prior to commencement of production is input service.

The appellant/ assessee, M/s Mangalam Cement Limited, has filed the present appeal challenging the order of the Commissioner (Appeals) confirming the order of the adjudicating authority disallowing the cenvat credit and confirming the demand towards its recovery.

The appellant is engaged in the manufacture of cement and clinker falling under Chapter 25 of the Central Excise Act, 1985 and has been availing cenvat credit on inputs, capital goods and input services under the provisions of Credit Rules, 2004. The appellant had set up another unit, i.e., Manglam Grinding Unit (MGU) which was located at a distance of about 2 kms from the existing original unit on a single piece of land.

On examination of the monthly ER-1, it was noticed that the appellant had availed the cenvat credit on input services which were actually used by them in the setting up of their new unit MGU which is not admissible after amendment of the definition of input service with effect from 01.04.2011.

The allegations in the Show Cause Notice that the two units were earlier separate and independent and obtained the common registration, therefore cenvat credit on the services availed prior to registration is not admissible, and is unsustainable.

Allowing the Cenvat Credit on input services the bench of P. V. Subba Rao, Member (Technical) and Binu Tamta, Member (Judicial) observed that “The services so utilized for setting up of the factory which were availed prior to the commencement of production shall fall within the means clause of the definition of input service, which has been held to be wide enough to allow Cenvat Credit of services used in or in relation to manufacture whether directly or indirectly.”

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