Relief to Hindustan Petroleum: CESTAT Holds Modernization Services within Refinery are 'Input Service’ and Eligible for CENVAT Credit [Read Order]
CESTAT ruled that service tax paid on modernization, renovation, and repair services within the refinery qualified as ‘input service’ under Rule 2(l) of the CENVAT Credit Rules and is eligible for CENVAT credit.
![Relief to Hindustan Petroleum: CESTAT Holds Modernization Services within Refinery are Input Service’ and Eligible for CENVAT Credit [Read Order]](https://images.taxscan.in/h-upload/2025/07/07/2060351-hindustan-petroleum.webp "Relief to Hindustan Petroleum: CESTAT Holds Modernization Services within Refinery are Input Service’ and Eligible for CENVAT Credit [Read Order]")
The Mumbai Bench of Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has allowed an appeal filed by Hindustan Petroleum Corporation Ltd. (HPCL), holding that Central Value Added Tax (CENVAT) credit availed on service tax paid for modernization services within the refinery premises were eligible to be classified 'input service' under Rule 2(l) of the CENVAT Credit...
The Mumbai Bench of Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has allowed an appeal filed by Hindustan Petroleum Corporation Ltd. (HPCL), holding that Central Value Added Tax (CENVAT) credit availed on service tax paid for modernization services within the refinery premises were eligible to be classified 'input service' under Rule 2(l) of the CENVAT Credit Rules, 2004.
Hindustan Petroleum Corporation Limited is a leading petroleum products manufacturer in India. HPCL carried out various modernization, renovation, and repair work at its refinery located in Mumbai. HPCL availed services from contractors such as M/s Linde Engineering, M/s Thermax Ltd., and M/s Thermax Babcock & Wilcox. related to modernization services.
HPCL took CENVATcredit of service tax paid on such services based on the invoices issued by these contractors. However, the Department contended that the construction services were outside the scope and ambit of the definition of ‘input service’, in terms of Rule 2(l) of the CENVAT Credit Rules, 2004 and initiated show cause proceedings.
The Principal Commissioner of Central Excise confirmed a demand of ₹3,16,28,456 in CENVAT credit along with interest under Section 11AA of the Central Excise Act, 1944. A penalty of an equivalent amount was also imposed under Rule 15(2) of the CENVAT Credit Rules, read with Section 11AC of the Central Excise Act.
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Aggrieved HPCL filed an appeal before the Tribunal.
The Tribunal, comprising S.K. Mohanty (Judicial Member) and M.M. Parthiban (Technical Member), examined a press bulletin issued by the Ministry of Petroleum and Natural Gas. The press bulletin mentioned various refinery modernization initiatives undertaken by Indian Oil Corporation Ltd., Bharat Petroleum Corporation Ltd., and HPCL.
The Tribunal observed that the services received by HPCL were engaged for modernization, renovation, and repair within the factory premises, which are covered under Explanation (ii) to Rule 2(l) of the CENVAT Credit Rules. It noted that the Department had not produced any evidence to prove that the services were used for the construction of buildings or civil structures that are specifically excluded under the definition.
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The Tribunal held that the service tax paid on such services was eligible for CENVAT credit. It accordingly set aside the impugned order and allowed the appeal.
The appellant was represented by M.H. Patil along with Mansi Patil, Viraj Reshamwala, and Abhijit Malankar, while the respondent was represented by Hemant Kumar Tantia.
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