Service relating to Modernization, Renovation are Input Services: CESTAT sets aside Demand for Cenvat Credit availed [Read Order]

The Customs, Excise, and Service Tax Appellate Tribunal (CESTAT), Kolkata bench has held that services relating to modernization, and renovation are input services and set-asides demand for Cenvat credit availed.

The appellant, M/s Jai Balaji Industries Ltd. is engaged in the manufacture of Iron and Steel products as well as articles of Iron and Steel. As part of their modernization/renovation project, the appellants decided to set up a Coke Oven Plant in their factory premises for which the Appellants gave contracts to a number of service providers and took credit of the service tax so paid, as tax paid on input service.

The department took the view that the services provided by the contractors were in the nature of ‘works contract services’ which, was excluded from the definition of ‘input service’ under the Cenvat Credit Rules, 2004, and demanded total ineligible Cenvat credit of Rs. 1,93,93,204/-, along with interest and an equal amount of penalty. The aggrieved appellant approached the CESTAT.

The counsel for the appellant submitted that the work of the Coke Oven Project was for the modernization of the appellant’s factory. Modernization of the factory was specifically covered in the inclusive definition of ‘input service’. All services received, whether works contract, construction, or otherwise, would be covered by the definition of ‘input service’ so long as they are covered by the inclusive part of the definition.

The Tribunal observed that the expression ‘modernization, renovation or repairs of a factory’ was appearing in the definition of ‘input service’ both before and after 01.07.2012. It has not been denied by the department that the Coke Oven Project of the appellants was towards modernization and renovation of their existing plant/factory.

The Coram of P. K. Choudhary, Judicial Member, and Mr. P. Anjani Kumar, Technical Member by relying on the decision of Ahmedabad CESTAT in M/s Reliance Industries vs CCE &ST has held that “the appellants have correctly taken credit of service tax paid/borne in respect of all services which were used for the Coke Oven Project as part of the modernization/renovation plan of the existing plant/factory”.

Mr. A. K. Prasad and Mr. J. Chattopadhyay appeared on behalf of the appellant and respondent respectively.

To Read the full text of the Order CLICK HERE

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