Relief to India Cements: CESTAT Rules Demolition Activity Qualifies as Factory Repair Under Rule 2(l) of CCR [Read Order]
CESTAT ruled that demolition of chimneys qualifies as factory repair under Rule 2(l) of CCR and allowed Cenvat credit to India Cements Ltd
![Relief to India Cements: CESTAT Rules Demolition Activity Qualifies as Factory Repair Under Rule 2(l) of CCR [Read Order]](https://www.taxscan.in/wp-content/uploads/2025/04/Relief-to-India-Cements-India-Cement-CESTAT-taxscan.jpg "Relief to India Cements: CESTAT Rules Demolition Activity Qualifies as Factory Repair Under Rule 2(l) of CCR [Read Order]")
The Chennai Bench of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) ruled that demolition of chimneys qualifies as “renovation or repair of factory” under Rule 2(l) of the Cenvat Credit Rules ( CCR ), allowing India Cements Ltd. to claim Cenvat credit on such services. India Cements Ltd., engaged in cement manufacturing, faced a demand of Rs. 1.10 crore along...
The Chennai Bench of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) ruled that demolition of chimneys qualifies as “renovation or repair of factory” under Rule 2(l) of the Cenvat Credit Rules ( CCR ), allowing India Cements Ltd. to claim Cenvat credit on such services.
India Cements Ltd., engaged in cement manufacturing, faced a demand of Rs. 1.10 crore along with interest and penalty for allegedly availing ineligible credit on services, including demolition of chimneys, transportation, and ISD-distributed credits. The adjudicating authority had ruled that the demolition of decommissioned chimneys could not be considered as modernization or repair under CCR.
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On appeal before the CESTAT, the appellant’s counsel argued that the demolition was essential to facilitate the movement of heavy vehicles for raw material transport, directly linked to the manufacturing process. The appellant’s counsel also defended the validity of ISD credit distribution and claimed eligibility for advertisement expenses as input services.
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The department’s counsel argued that the ISD credit distribution was improper and not aligned with turnover-based allocation as required under Rule 7 of CCR, and recovery was valid.
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The two-member bench comprising Ajayan T.V. (Judicial Member) and Vasa Seshagiri Rao (Technical Member) examined the definition of input service under Rule 2(l) of CCR and observed that the term “in relation to” is to be interpreted broadly, encompassing activities that directly or indirectly facilitate manufacturing.
The tribunal observed that the chimneys, though decommissioned, were located within the factory premises and their demolition was essential for operational efficiency, qualifying as renovation or repair of the factory. The tribunal set aside Rs. 1.10 crore demand, interest, and penalty and allowed the appeal, granting relief to India Cements Ltd.
To Read the full text of the Order CLICK HERE
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