In M/s KEC International Ltd v. CCE Bhopal, the Delhi bench of the Customs, Excise & Service Tax Appellate Tribunal has held that cenvat credit can be availed on all the services used for providing erection, commissioning and installation service on turnkey basis.
The Assessee in the present case is engaged in the manufacture or clearance of Galvanized Transmission Line Tower and parts thereof, cables etc. along with providing output services of erection, commissioning and installation of transmission tower line projects on turnkey basis.
During the assessment period, the Assessing Officer (AO) noticed that the Assessee Company procuring tower and parts thereof from their manufacturing units and other items bought from the open market and providing services on so procured materials for erection, commissioning and installation of the transmission line. He was of the view that the Assessee engaged in the activity of trading and therefore, denied the benefit of cenvat credit to the Assessee.
He further noticed that the Assessee is engaged in providing services from bought out items to their customer, hence neither paying Central Excise duty nor service tax on such bought out items supplied directly at the site or from the manufacturing units. According to him, such trading activity neither comes under the provisions of Central Excise Act, 1944 nor as taxable services under Finance Act, 1994. Accordingly, a show cause notice has been issued by invoking the extended period of limitations.
Before the Tribunal, the counsel for the Assessee, Advocate Archit Agarwal submitted that the Assessee is engaged in turnkey project and has not engaged in any trading activity and it is an admitted fact that they were procuring the goods and using the same for providing the services of erection, commissioning and installation as turnkey project. In such circumstances, no proportionate Cenvat credit is required to be reversed on account of trading activity.
After considering the facts and circumstances of the case, Judicial Member Ashok Jindal observed that “the Assessee in the present case is engaged in the activity of erection, commissioning and installation of certain project items at the site and on turnkey basis. In order to provide such services the Assessee Company has procured certain items from their manufacturing unit or some bought out items used by providing that service, but it does not indicate that the Assessee is engaged in the activity of trading and it is a clear fact that the Assessee is only a service provider. In such circumstances, the show cause notice was not required to be issued to the Assessee”.
While allowing the appeal filed by the Assessee the Tribunal further held that the Assessee in the instant case, has correctly availed the Cenvat credit on all the services used for providing erection, commissioning and installation service on turnkey basis.
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