Cenvat Credit allowable on Material used for Construction of Building or Fabrication of Equipment used for Output Taxable Service [Read Order]

The Ahmedabad Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT), observed that cenvat credit is allowable on the material used for construction of building or fabrication of equipment used for output taxable service.

The issue involved in the present case is that whether the appellant, Shreeji Shipping, is entitled for the Cenvat credit on various steel materials such as Steel Plates, HR Plates, Angles, Channels etc. during the period 2008-09 to 2011-12 which were used in the manufacture of barges and such barges were used for providing output services such as Port service, Cargo Handling Service, Supply of Tangible goods for use.

The case of the department is that since the material on which the Cenvat credit was claimed were not used directly for providing of any taxable service, Cenvat credit on such material is not available to the appellant.

PD Rachchh, the Counsel who appeared on behalf of the appellant submitted that as per the definition under Rule 2(k), all goods used for providing ouput service are eligible for inputs for allowing Cenvat credit. In the present case there is no dispute that Steel Plates etc. were used in the fabrication of barges and barges were used for providing output service. Therefore, directly or indirectly inputs were used in relation to providing output service through barges therefore, credit is admissible.

Tara Prakash, Deputy Commissioner (AR) who appeared on behalf of the Revenue reiterated the findings of the impugned order.

A Two-Member Bench comprising Ramesh Nair, Judicial Member and CL Mahar, Technical Member observed that “The issue is no longer res-integra accordingly any material used for construction of building or fabrication of any equipment which is in turn used for providing output taxable service, on the material so used, the credit is correctly admissible. Therefore, considering the settled legal position on the issue in hand, the impugned order is not sustainable, hence the same is set-aside.”

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