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CX - Even if provider chooses to pay tax on exempted service, same shall be available as CENVAT credit: CESTAT

By TIOL News Service

MUMBAI, SEPT 22, 2017: THE dispute in the present case is regarding admissibility of the CENVAT credit on input services namely Construction of scrap yard, barbed wire fencing, canteen hall and dining hall, security services at guest house. Credit in respect of construction of road and drainage system inside factory was also disallowed on the ground that these services are exempted, therefore, service tax paid on exempted service in not admissible as CENVATcredit.

The appellant placed reliance on almost two dozen case laws to submit that all the issues raised by the department are covered in their favour and, therefore, there is no reason to deny them the credit.

Notable amongst these cases are 2015-TIOL-2343-CESTAT-MUM, 2014-TIOL-1504-CESTAT-MUM, 2016-TIOL-2373-CESTAT-ALL, 2012-TIOL-199-HC-AP-ST, 2016-TIOL-2049-CESTAT-DEL, 2017-TIOL-1737-CESTAT-MUM, 2016-TIOL-2078-CESTAT-MUM, 2010-TIOL-1900-CESTAT-MUM, 2015-TIOL-1455-CESTAT-BANG, 2008-TIOL-245-SC-CX, 2015-TIOL-1459-CESTAT-DEL, 2015-TIOL-1842-CESTAT-MUM, 2016-TIOL-365-HC-AHM-CX.

The AR, while reiterating the findings of the lower authorities, submitted that the appellant did not properly explain the use of the services, therefore, it cannot be said that services were used in or in relation to the manufacture of final product and satisfy the definition of ‘Input service' given in Rule 2(l) of CCR.

The Bench observed that in respect of all the services which are under dispute much water has flown and it has been consistently held that credit is admissible on -

++ Construction of Staff Residential Quarter, Guest House, Bachelors Quarter And Tent House Within Factory Premises

2015-TIOL-2343-CESTAT-MUM = Reliance Industries Ltd. Vs. CCE, Mumbai

2014-TIOL-1504-CESTAT-MUM = TATA Management Training Centre Vs. CCE, Pune-III

2016-TIOL-2373-CESTAT-ALL = Bajaj Hindustan Ltd. Vs. CCE, Allahabad

2012-TIOL-199-HC-AP-ST = CCE, Hyderabad-III Vs. ITC Ltd.,

2016-TIOL-2049-CESTAT-DEL = Mangalam Cement Ltd. Vs. CCE, Jaipur-I

2017-TIOL-1737-CESTAT-MUM = Shri Vaisnav Industries Pvt. Ltd. Vs. CCE, Thane

2016-TIOL-2078-CESTAT-MUM = JSW Steel (Salav) Ltd. Vs. CCE, Raigad

++ Construction of Scrap Yard, Barbed Wire Fencing, Canteen Hall And Dining Hall Inside Factory Premises

2015-TIOL-1459-CESTAT-DEL = CCE, Delhi-III Vs. KML Molding

++ Security Services At Guest House

2015-TIOL-1842-CESTAT-MUM = ISMT Ltd Vs. CCE, Aurangabad

2015-TIOL-1096-CESTAT-MUM = Ultra Tech Cement Ltd. Vs. CCE, Nagpur

The CENVATcredit was allowed on the above services by treating them as Input service.

The CESTAT further noted that CENVAT credit was disallowed on the services related to construction of road and drainage system inside the factory on the ground that such services were exempted services.

In this regard, the Bench observed -

"…I am of the view that unlike in Central Excise Act, under Section 5A there is no restriction for payment of service tax on exempted service, therefore, if the service provider choose to pay service tax, the same shall be available as Cenvat credit to the recipient of the service, this issue has been considered in various decision cited by the appellant therefore I am of the view that Cenvat credit is clearly admissible." [2010-TIOL-1900-CESTAT-MUM = Manikgarh Cement, 2015-TIOL-1455-CESTAT-BANG = India Vision Satellite Communications Ltd., - 2008-TIOL-245-SC-CX = CCE Vs. MDS Switchgear Ltd. relied upon]

The impugned order was set aside and the appeal was allowed.

(See 2017-TIOL-3450-CESTAT-MUM)


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