By TIOL News Service

AHMEDABAD, MAR 20, 2013: THIS is a Revenue appeal.

The issue involved is regarding eligibility of CENVAT credit on Air Compressors purchased and received in the factory premises on 05/05/2005.

The appellant was providing the following service viz. "Commercial and Industrial Construction Services (Pipeline Services)" which were brought into the tax net from 16.6.2005.

The adjudicating authority held that the CENVAT credit could not be availed of the duty paid on such Air Compressors though it is capital goods as the said capital goods were received in the premises of the service provider i.e. respondent before the services were held to be taxable under the Finance Act, 1994.

The first appellate authority after considering the submissions set-aside the O-in-O and held in favour of the assessee.

So, now the Revenue is aggrieved and is before the CESTAT.

Arguments followed and the Bench after distinguishing the order of the Gujarat High Court in Gujarat Propack (2008-TIOL-717-HC-AHM-CX) relied upon by the respondent observed -

"6. I find that an identical issue in respect of the capital goods received for the manufacturing of final products which were exempted, was being heard and the eligibility for availing the credit was decided by the Larger Bench of the Tribunal in the case of Spenta International Limted - (2007-TIOL-1089-CESTAT-MUM-LB). The ratio of the said judgment is clearly recorded in paragraph 10, which is reproduced as under:-

"10. In the light of the above discussion, we answer the reference by holding that CENVAT credit eligibility is to be determined with reference to the dutiability of the final product on the date of receipt of capital goods."

7. The learned counsel would try to distinguish the said judgment by stating that the judgment was in respect of the capital goods which were used and which required installation during the relevant period. I find that such distinguishing factor will not carry the case of the assessee any further, inasmuch as the facts in this case are not disputed which indicates that such capital goods can be utilised by the assessee only for the services to be rendered which came into service tax net from 16.6.2005. If that be so, I am bound the judgment and ratio of which has been reproduced herein above…."

Holding that there is merit in the appeal filed by the Revenue, the order of the Commissioner(A) was set aside and the appeal was allowed.

(See 2013-TIOL-477-CESTAT-AHM)