Cement and Steel are Directly Used in Commercial and Industrial Construction Services, Cenvat Credit allowable for Products used for providing Output Services: CESTAT [Read Order]

The Ahmedabad bench Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has held that Cenvat Credit was allowable for Products used for providing Output Services as Cement and Steel are directly used in Commercial and Industrial Construction Services.

Shri Tarun Chatterjee counsel of the appellant Bridge & Roof Co (India) Limited submitted that the Cenvat credit was denied on the ground that the same falls under the exclusion category as brought in the Rule vide Notification No. 16/2009-CE (NT) dated 07.07.2009. 

The explanation to the definition of input service by the aforesaid notification is in respect of the manufacturer and not for the service provider therefore, the interpretation of the department on an amendment in explanation-2 by Notification No. 16/2009-CE (NT) is erroneous and on this basis, credit should not have been denied. 

The denial of the Cenvat is solely based on the amendment in explanation-2 to the definition of Input by Notification No. 16/2009-CE (NT) hence it is necessary to read the definition and explanation which is reproduced.

From the plain reading of explanation-2, it can be seen that explanation 2 is exclusively applicable to the manufacturer and not to the service provider.  Therefore, the entire case based on the amendment in explanation-2 cannot sustain. 

A plain reading of clause(ii) of the definition read with explanation-2, explains that the exclusion provided in explanation-2 applies to the manufacturer and as regards the service provider in terms of clause(ii) of definition Input the service provider is entitled to Cenvat credit of inputs which are used for providing output service. 

The two-member bench comprising Mr Ramesh Nair, Judicial Member and Mr C L Mahar, Technical Member observed that the appellant provided output service viz. Commercial and Industrial Construction Services and for that Cement and Steel are vital inputs without which output service cannot be provided.  Therefore, there is no doubt that the appellant is legally entitled to the Cenvat credit on Cement and Steel used for providing output service i.e. Commercial and Industrial Construction Services.  

In the case of Mundra Ports & Special Economic Zone Limited (supra), “the credit of Cement and Steel was allowed against the output service of Port Service.  Even though cement and steel were directly used for output service for the construction of the jetty and then the jetty was used for services, credit was allowed.” 

It was evident that cement and steel were directly used in Commercial and Industrial Construction Services. The CESTAT bench held that the appellant is legally entitled to Cenvat credit on Cement and Steel used for providing output service and set aside the impugned order.

To Read the full text of the Order CLICK HERE

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