No CENVAT taken on Inputs/ Capital Goods or Input Services used in Rendering Service Goods: CESTAT Remands for Reconsideration [Read Order]

The Ahmedabad bench of the Customs Excise and Service Tax Appellate Tribunal ( CESTAT ) has remanded the case for reconsideration, stating that no Central Value Added Tax ( CENVAT ) credit was taken on inputs, capital goods, or input services used in rendering the service goods.

The Appellant M/s. SMP Constructions pvt ltd was engaged in providing Industrial or Commercial Construction Services under different contracts. They were providing services under different contracts. In terms of some contracts, it was required for the appellant to provide the materials such as cement, steels etc., and in terms of some it was required for the appellant to provide the services along with the materials. In other words, some contracts were inclusive of materials.

Whereby an abatement was provided with a condition that Cenvat Credit of duty paid on inputs or capital goods or input services has not been availed. In some cases, the appellant discharged their Service Tax Liability @4.12% and @4.94% on the value in terms of the Works Contract (Composition Scheme for payment of Service Tax) Rules, 2007.

In case of some contracts where the appellant was required to bring the materials, they used to purchase directly from the manufacturers on payment of duty and to send the same directly to the concerned site. At the concerned cite, the appellant would maintain the required records of the materials and accordingly, the Cenvat credit was being availed and in case of such contracts, they used to discharge Service Tax liability on 100% value, without availing benefit of the abatement as provided under the said notification.

The bench observed that no CENVAT credit on inputs, capital goods or input services shall be taken. So long as this condition is satisfied, abatement is permissible. Discharge of service tax liability on the non-abated portion of value is a totally different matter. Hence there is no bar/restriction in discharging service tax liability through accumulated CENVAT credit so long as no CENVAT credit is taken on the inputs/capital goods or input services used in the rendering of the service in the given case or contract

The two member bench of the tribunal comprising Ramesh Nair (Judicial member) and Raju Technical member) concluded that adjudicating authority can reconsider the issue afresh based out of the factual matrix of the present case taking into account the submissions made by the Appellant as regards the effect of availment of Cenvat credit and abatement where credit was not availed at all. Therefore, CESTAT found that the issue needs to be remanded back to the adjudicating authority for reconsideration.

To Read the full text of the Order CLICK HERE

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