HP Gets Partial Excise Relief: CESTAT Allows Cenvat Credit on Input Services Pre-2011, Disallows Construction Credit Post Amendment [Read Order]

The Hyderabad Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) gave partial relief, allowing Cenvat credit on input services before 01.04.2011 but disallowed credit on construction related services after the amendment, and also removed the penalty.

Hindustan Petroleum Corporation Ltd. filed an appeal against the order where Cenvat credit of about Rs. 1.15 crore was disallowed with interest and penalty. The dispute was for the period from October 2010 to October 2011 and involved services like manpower, catering, insurance, construction, repair and transport. Some amount was already reversed and rest was in dispute.

The appellant argued that these services come under input service as per law. The counsel argued that before 01.04.2011 the definition was very wide and covered all business related activities. It also argued that after amendment only some services are excluded and others should still be allowed. It also said services like manpower, insurance, cleaning and repair are necessary for business.

The department argued that services like construction, civil work and catering are not directly related to manufacture. They argued that after 01.04.2011 law clearly excludes construction related services and appellant did not show proper connection.

The two-member bench comprising A.K. Jyotishi and Angad Prasad observed that before 01.04.2011 definition of input service is wide and covers services connected to business. The tribunal observed that services like manpower, insurance, cleaning, catering and repair are linked with business, so credit is allowed for that period.

The tribunal observed that after 01.04.2011 some services are excluded. It pointed out that construction and civil works come under exclusion, so credit is not allowed for those. But it explained that services like manpower, insurance, cleaning and repairs (not new construction) are still allowed.

The tribunal also observed that authority did not properly separate allowed and not allowed credit, so re-calculation is needed. It explained that interest is only on disallowed part and penalty is not proper because the issue is about interpretation.

Finally, the tribunal partly allowed appeal, removed penalty and sent the matter back for re-quantification.

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