CESTAT orders re adjudication for inclusion of Services for setting up and Modernization of Factory under Input Services [Read Order]

The Ahmedabad Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT), ordered re adjudication for inclusion of services for setting up and modernization of factory under input services.

The revenue observed that the credit taken by the appellant, Kohler India Corporation Private Limited appears to be inadmissible in terms of Rule 3(1) and Rule 2 (l) of the Cenvat Credit Rules, 2004 according to which the input services should be used either for providing output service or should be used directly or indirectly by the manufacturer in relation to manufacture of excisable goods.

In the instant case, the impugned services are used in construction of a civil structure and prefabricated steel structure which is attached to earth. The building of a Factory is neither an output service nor it is subjected to central excise duty nor to the service tax.

The Revenue observed that these services are not used by the appellant as a manufacturer, whether directly or indirectly, in or in relation to manufacture of final products in as much as these services are used only for the construction of civil structure and pre-fabricated steel structure for their manufacturing plant, which is not subjected to excise duty nor to the service tax. Thus the Cenvat Credit does not appear to be admissible.

The Adjudicating Authority confirmed the entire demand of ineligible Cenvat credit along with interest under Rule 14 of the Cenvat Credit Rules read with Section 11A(1) of the Central Excise Act, 1944 and imposed equivalent penalty under Rule 15(2) of the Cenvat Credit Rules read with Section 11AC of the Central Excise Act, 1944. Therefore, the present appeal has been filed by the appellant.

A Bench consisting of Ramesh Nair, Judicial Member and Raju, Technical Member observed that “The definition of input services as existed at relevant point of time includes the Services for setting up and modernization of factory and therefore, the appellant are eligible to claim Cenvat Credit of such services.”

“We find that all the services per se are prima facie input services held in various judgments, however, the admissibility of Cenvat credit on these services can be decided on the basis that whether the services were used for the purpose specified in the definition of input service. Therefore, we are of the view that the entire matter needs to be re-considered.”

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