CESTAT allows Cenvat Credit of Service Tax on Input Services for initial setting up of Factory [Read Order]

The Ahmedabad Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT), allowed cenvat credit of service tax on input services for initial setting up of factory.

The issue relates to availment of cenvat credit of the service tax paid by the appellant, Basfduring the period April 2011 when the setting up of the factory started to the period March 2016 when the setting up of the factory was completed and commercial production started.

The appellant had availed various input services and the show cause notice seeks to deny cenvat credit of these services in relation to fabrication of plant and machinery in the factory and making plant and machinery operational. The show cause notice essentially relies on the changes made in the definition of input services appearing in Rule 2(l) of the Cenvat Credit Rules, 2004.

The show cause notice allege that by virtue of this change of omission of the words ‘setting up’ credit of services availed during the period of settingup of the factory became ineligible for cenvat credit. The show cause notice mainly invoked this provision for denial of cenvat credit.

The show cause notice also invoked Rule 4(7) of the Cenvat Credit Rules to hold that the credits availed after one year of the date of issue of the documents specified in sub-rule (1) of Rule 9 of Cenvat Credit Rules, 2004 is inadmissible.

The Counsel for the appellant submitted that if the services availed are covered by the definition of the term ‘input service’ otherwise then even if, the services are used for the purpose of initial setting up of the factory, the credit would admissible despite removal of the word ‘initial setting up’ from the definition of input service.

The Counsel also pointed out that the changes made in the definition of input service from 01.04.2022 to 01.04.2012 have been interpreted by various decisions of Tribunal. He argued that all the decisions of Tribunal held that ‘means portion of the input service definition has not been amended during this period’.

A Coram consisting of Ramesh Nair, Technical Member and Raju, Judicial Member observed that “We find that without use of these services, the appellant could not have possibly manufactured the excisable goods. In this background, we do not find any merit in the argument of the Revenue that by deletion of word ‘setting up’ from the definition of input service any significant change has happened.”

To Read the full text of the Order CLICK HERE

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