CBEC should clarify & help the 'Swachh Bharat Abhiyan'?
JANUARY 28, 2015
By Pritam Mahure, CA
WASTE management entities are engaged in the business of waste disposal/waste management. On the charges collected towards waste disposal, waste management entities collect and deposit Service Tax.
These entities help the municipalities maintain cities clean, in line with the Governments' 'Swachh Bharat' campaign.
As per the criteria prescribed by Central Pollution Control Board , the waste should be disposed-off at a Secured Landfill Facility (SLF). SLF is a pit with a base of murum . After the waste is disposed, SLF is covered by HDPE sheetsto avoid direct contact with water, environment etc. Creation of SLF does not involve any cement or steel (as it's not a cement tank) but rather a pond used for filling waste.
In this regard for making Secured Landfill Facility (SLF) various services are availed such as:
a. For increasing depth / height
b. Putting murum and soil on it
c. Land levelling services
Issue
CENVAT credit on services used for preparation of SLF is being denied by the Service Tax Authorities on the ground that the exclusion clause in 'input service' definition (Rule 2 (l) of CCR) denies CENVAT credit of works contract / construction services used for construction of 'building' or 'civil structure' .
Action whether justified?
In the following paras, let's understand whether CENVAT Credit of services used for making SLF is available?
Legal provisions
Rule 2 (l) of CENVAT Credit Rules, 2004 provides definition of 'input services as under:
(l) "input service" means any service, -
(i) used by a provider of output service for providing an output service; …
but excludes, -
(A) service portion in the execution of a works contract and construction services including service listed under clause (b) of section 66E of the Finance Act (hereinafter referred as specified services) in so far as they are used for -
(a) construction or execution of works contract of a building or a civil structure or a part thereof ; or
(b) laying of foundation or making of structures for support of capital goods, except for the provision of one or more of the specified services; or…
Analysis
From the language used in the CENVAT Credit Rules, it is apparent that CENVAT Credit is available in respect of any services :
- Used by a provider of output service
- For providing an output service
However, the exclusion clause denies CENVAT credit of works contract / construction services usedfor construction of 'building' or 'civil structure' . Thus, the underlying question that needs to be answered as whether SLF ( Secured Landfill Facility) is a 'building' or 'civil structure'?
Let's understand meaning of the term 'building' and 'structure':
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Term
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Meaning
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Building
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What a building must always be a question, of degree, and circumstances: its ordinary and usual meaning is, a block of brick or stone work, covered in by a roof [Moir v Williams (1892) 1 QB 264]
The word 'building' occurs in different statutes and has been construed according to the context in which the word has been used [Indian City Properties Ltd (SC) (2005)]
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Civil structure
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The word 'structure' is used as a generic term so that while all buildings may be structures, all structures are not buildings [Indian City Properties Ltd (SC) (2005)]
Any building could properly be called a structure, but there are many structures which one would not normally call buildings [Almond v Birmingham Royal Institution, (1967) 2 All ER 317]
A Structure is something which is constructed, but not everything which is constructed is a structure. A ship, for instance, is constructed, but it is not a structure. A structure is something of substantial size which is built up from component parts and intended to remain permanently on a permanent foundation, but it is still a structure even though some of its parts may not be movable, as for instance, about a pivot. Thus a windmill or a turntable is a structure [Cardiff Rating Authority v Guest Keen Baldwins Iron & Steel Co. Ltd., (1949) 1 All ER 27]
Structure is defined to be that which is built or constructed; an edifice or a building of any kind or objects constructed from several parts [New Oxford Dictionary]
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It can be observed that SLF,which is prepared by digging a pit and later covered by HDPE sheets may not qualify as 'building or civil structure or part thereof'.
Given the above, CENVAT credit should be available to the entities providing Waste Management Services.
Way forward
The Board should come out with a clarification at the earliest. As they say, Haste makes waste and that is precisely that the field formations are bent on doing, it seems.
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