In a recent ruling, the Customs, Excise, and Service Tax Appellate Tribunal ( CESTAT ) of the Ahmedabad Bench held that the services used for port expansion and modernisation were eligible for CENVAT Credit.
In this case, the assessee, M/S Gujarat Pipavav Port Limited, is engaged in availing Cenvat Credit of C. Excise Duty/Service Tax paid on inputs, capital goods, and input services under Rule 3 of Cenvat Credit Rules, 2004.
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The main issue, in this case, is regarding the eligibility of CENVAT Credit under Rule 3 of the CENVAT Credit Rules, 2004 for services availed with regard to the proposed expansion and modernization of port infrastructure by the assessee.
A Show Cause Notice dated 18.03.2016 was adjudicated by Order-In-Original dated 26.04.2017, confirming recovery of Cenvat Credit of Rs. 1,16,09,939 with interest and imposing an equal penalty. The adjudicating authority ruled that the services availed by the respondent under service agreements were intended for future use in a new facility and not for providing existing output services. These services were deemed unrelated to modernization, renovation, or repair of premises for output services and thus excluded from the definition of ‘input service.’
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The respondent, who was aggrieved by the above order, appealed before the Commissioner ( Appeals ) and the latter allowed the appeal and set aside the Order-In-Original.
The revenue has appealed against the decision of the Commissioner ( Appeals ).
The counsel on behalf of the revenue contended that the ‘input service’ includes services used by a provider for delivering output services, as well as those related to modernization, renovation, or repair of the provider’s premises, and that in this case, the services were for proposed port expansion or additional berths. It was further contended that the Appellate Authority erred in arriving at the conclusion that the respondent was providing port services.
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It was contended by the counsel on behalf of the respondent that the services were necessary for the modernization and expansion of existing port facilities to meet increasing business demands and were integral to providing taxable output services.
It was further contended by the counsel on behalf of the respondent that the services are availed in respect of the modernization, improvisation, and expansion of the existing facilities at the port, and the services availed have a direct nexus with the provision of port services to the customers. The counsel also relied on several judgements in which similar services for expansion and modernization were held eligible for Cenvat Credit.
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The bench, by going through various judicial precedents, concluded that the services used for port expansion and modernization were eligible for CENVAT credit.
The bench, comprising Somesh Arora ( Judicial Member ) and C L Mahar ( Technical Member ) dismissed the appeal filed by the revenue.
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