CESTAT Allows CENVAT Credit on Service Tax Paid for Construction Services as Exclusion Applied Only from April 1, 2011 [Read Order]
The tribunal observed that even after the amendment, services related to renovation and repair of factory premises continued to qualify as input services
CESTAT Bangalore, CENVAT Credit, Service Tax Paid
CESTAT Bangalore, CENVAT Credit, Service Tax Paid
The Bangalore Bench of Customs, Excise and Service Tax Appellate Tribunal ( CESTAT ) allowed CENVAT credit on service tax paid for construction services, holding that the exclusion of such services from the definition of ‘input service’ under Rule 2(l) of the CENVAT Credit Rules, 2004, applied only from April 1, 2011.
Apotex Research Pvt. Ltd.,appellant-assessee,was engaged in manufacturing pharmaceutical products under Chapter Heading 3004 of the Central Excise Tariff Act, 1985. During audit, it was found that the appellant had availed CENVAT credit of Rs. 62,06,688 on service tax paid for construction services between November 2010 and May 2011.
Since construction services were excluded from the definition of ‘input service’ under Rule 2(l) of the CENVAT Credit Rules, 2004 from April 1, 2011, a show-cause notice was issued for recovery of the said credit along with interest and penalty. The adjudicating authority confirmed the demand with interest and penalty, which led to the present appeal.
The assessee counsel argued that most of the demand related to the period before April 1, 2011, when construction services were not excluded from the definition of input service. Hence, the credit availed for that period was eligible. For the period after April 1, 2011, the counsel stated that the services were for renovation and repair of the factory building, which were still covered under the amended rules.
To support these arguments, the counsel relied on decisions in Infosys Ltd. v. CST, Bangalore, CCE & ST v. Hyundai Motor India Engineering (P) Ltd., and Ion Exchange (I) Ltd. v. CCE & C&ST, Surat-II. The departmental counsel supported the order of the Commissioner (Appeals).
The two member bench comprising D.M.Misra (Judicial Member) and Pullela Nageswara Rao (Technical Member) considered submissions from both sides and reviewed the records. It noted that the dispute centred on whether CENVAT credit on service tax paid for construction services during November 2010 to May 2011 was admissible.
It found that before April 1, 2011, construction services were not excluded from the definition of input service under the CENVAT Credit Rules, 2004. Since most of the demand related to this period, the Tribunal held that denial of credit for services availed before the amendment was not justified.
For the period after April 1, 2011, the tribunal observed that while construction services were added to the exclusion clause, services related to modernization, renovation, or repair of factory premises continued to qualify as input services. Referring to the Ion Exchange (I) Ltd. case, it held that credit on such services remained admissible even after the amendment.
Based on these findings, the appellate tribunal concluded that the appellant was eligible for CENVAT credit on construction services for the period from November 2010 to May 2011. The impugned order was set aside, and the appeal was allowed with consequential relief.
Support our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates
