Case Law Details
Balkrishna Industries Ltd. Vs Commissioner (CESTAT Delhi)
The appeal arose from the order dated 05.05.2021 passed by the Commissioner (Appeals), upholding denial of CENVAT credit, interest and penalty. The dispute concerned two issues: (i) admissibility of CENVAT credit on repair and maintenance services relating to the factory, office premises, plant and machinery, and (ii) admissibility of CENVAT credit of service tax on freight for receipt of inputs/fuel based on invoices issued by the supplier/trader. The appellant manufactures pneumatic tyres falling under Chapter 40 of the First Schedule to the Central Excise Tariff Act, 1985.
During audit for the period May 2012 to March 2015, the Department alleged that the appellant had wrongly availed CENVAT credit on services relating to civil work, erection of steel structures, gate fixing, pipe railing, fabrication work, shed fabrication and other repair and maintenance work, treating them as works contract or construction services excluded from the definition of “input service” under Rule 2(l) of the CENVAT Credit Rules, 2004. It was also alleged that the appellant had wrongly availed CENVAT credit of ₹9,312 on service tax relating to freight for petroleum coke supplied in June 2013, as the supplier’s invoices merely stated that the amount was inclusive of service tax on freight. A show cause notice dated 10.03.2016 proposed disallowance of CENVAT credit amounting to ₹6,57,658, comprising ₹6,48,346 relating to construction services and ₹9,312 relating to GTA service.
The matter had earlier been remanded by the Commissioner (Appeals) on 28.01.2019 directing the adjudicating authority to examine the actual nature of the work and verify whether service tax had actually been paid on the GTA invoices. However, by order dated 21.02.2020, the Assistant Commissioner again confirmed the entire demand, holding that the disputed services were civil construction or works contract services excluded from the definition of input service. As regards GTA service, it was held that since the consignor had paid service tax, only the consignor was entitled to CENVAT credit. The Commissioner (Appeals) upheld this order, leading to the present appeal.
The appellant contended that the disputed services were repair and maintenance activities specifically covered within the inclusive portion of the definition of input service under Rule 2(l), including repairs to tiles, flooring, pipelines, sliding door tracks and STP tank fabrication. It argued that these activities related to repair and maintenance of the factory and did not constitute new construction falling within the exclusion clause. The appellant also relied on an earlier Tribunal order in its own case and several other decisions. Regarding GTA service, it submitted that the remand order required verification only of actual payment of service tax, which the adjudicating authority itself had accepted. It argued that, as the recipient of the GTA service used for transportation of fuel, it was entitled to CENVAT credit irrespective of whether service tax had been deposited by the consignor or consignee. It also contended that the extended period of limitation was not invocable as all transactions were duly recorded in its books and returns.
The Revenue relied on the impugned order.
The Tribunal observed that the appellant had received construction-related services for repair and maintenance carried out within the factory premises. It held that repair and maintenance of a factory was specifically included within the definition of input service under Rule 2(l). The Tribunal further noted that the issue stood covered by its earlier decision in the appellant’s own case, holding that such services were repair and maintenance work and did not involve new construction.
On the GTA credit, the Tribunal found that the appellant was the receiver of the input service. It observed that the invoices specifically recorded that service tax on the freight component had been deposited and that the authorities below had also accepted that service tax had been paid. The Tribunal held that entitlement to CENVAT credit depended on the appellant being the recipient of the input service and that it was immaterial whether the service tax had been deposited by the consignor or the consignee. Accordingly, it held that the appellant was entitled to CENVAT credit on the GTA service as well.
The Tribunal set aside the impugned order, allowed the appeal, and granted the appellant consequential relief in accordance with law.
Cases Discussed
- Hindustan Zinc Ltd. vs. CCGST, F.O. No. 51617-51618/2021 dated 22.06.2021
- Grasim Industries Ltd. vs. Commissioner of CGST & ST, CE & Cus, 2020 (4) TMI 673 – CESTAT, New Delhi
- Hindustan Zinc Ltd. vs. CCE, 2020 (8) TMI 2 – CESTAT, New Delhi
- Bharat Oman Refineries Ltd. vs. CCE, 2019 (2) TMI 746 – CESTAT, New Delhi
- Hindustan Zinc Ltd. vs. CCE, Udaipur, 2018 (3) TMI 102 – CESTAT, New Delhi
- CCE vs. Exide Industries Ltd. (CESTAT Delhi), 2016 (43) STR 463 (Tri. Del.)
FULL TEXT OF THE CESTAT DELHI ORDER
The issue in this appeal is whether cenvat credit on input service have been rightly denied on-
i. Repair and maintenance of factory/ office premises/plant and machinery; and
ii. Cenvat credit availed of service tax on the strength of invoices for freight for receipt of input/ fuel, issued by the supplier / trader.
2. The appellant is engaged in the manufacture of pneumatic tyres, used in agricultural/ forestry/ other machines and motor vehicles falling under Chapter 40 of the First Schedule to the Central Excise Tariff Act, 1985.
3. During the course of audit for the period, i.e., May 2012 to March, 2015, it was observed that the appellant had availed cenvat credit on certain ineligible services relating to civil work, erection of steel structure, gate fixing, fixing of pipe railing, fabrication work, shed fabrication work and other maintenance/ repair work of factory etc. which were in the nature of works contract services/ construction services, hence, excluded from the purview of definition of “input service” under Rule 2(l) of the Cenvat Credit Rules, 2004.
4. In June, 2013, non-calcined Grade „A‟ petroleum coke was supplied to appellant by M/s Satchidanand Petroleum Pvt. Ltd., who purchased it from Reliance Industries Ltd., Jamnagar (Gujarat). Such pet coke was used by appellant as fuel in the boiler for generating steam to manufacture pneumatic rubber tyres. It was alleged during audit, that the appellant had wrongly availed cenvat credit amounting to Rs.9,312/- on the strength of six invoices issued in June, 2013 where service tax has not been charged, but stamped on invoice „that amount is inclusive of service tax of Rs. 9,312/- charged on freight of Rs.2,55,395/-, paid by the supplier. The appellant have availed cenvat credit thereof as the appellant being recipient of G&TA service. As SPPL is not a service provider, and has not paid service tax, therefore, input service credit availed by the appellant is not admissible, as per revenue.
5. Thereafter show cause notice dated 10.03.2016 was issued proposing to recover Rs.6,48,346/- being attributable to construction services which did not appear to be used by them directly or indirectly, in or in relation to manufacture of final products and clearance of final products upto the place of removal. It further appeared that construction services used for building or a civil structure or a part thereof was specifically excluded from the definition of input service in Rule 2(l) of Cenvat Credit Rules. It was further proposed to disallow Rs. 9,312/- being service tax paid on freight as indicated in the invoice of the trader who had supplied petroleum coke/ fuel, as it appeared that service tax have not been charged specifically in the invoice. Thus, the total service tax proposed to be disallowed of Rs.6,57,658/-.
6. This is the second round of litigation. In the first round, the show cause notice was adjudicated on contest vide order-in-original dated 30.11.2017 whereby the proposed demand was confirmed by ex-parte order. In appeal preferred by the assessee the Commissioner (Appeals) vide order-in-appeal dated 28.01.2019 allowed the appeal by way of remand, directing the Assistant Commissioner to examine the actual nature of work undertaken by the appellant and also to examine cenvat credit on GTA service, if service tax has actually been paid in respect of such invoices.
7. Pursuant to remand vide order-in-original dated 21.02.2020, the Assistant Commissioner have again been pleased to confirm the entire demand of cenvat credit observing that the construction services inter alia include dismantling of RCC, shifting of malwa for construction/ working including glazing & tile fitting, fabrication work are in the nature of civil construction/ work contract, being service excluded and thus are excluded from the definition under the exclusion clause. As regards the cenvat credit on GTA service, it was held that the consignor gave a declaration on the invoice that the amount of service tax charged on freight is paid by them and they have not availed cenvat credit thereof. It was held that service tax on GTA has been charged and deposited by the consignor i.e., SPPL, therefore, cenvat credit is available only to the consignor and not consignee / appellant.
8. Being aggrieved, the appellant preferred appeal wherein the learned Commissioner (Appeals) by the order dated 05.05.2021 have upheld the denial of entire cenvat credit alongwith interest and also imposed penalty. Being aggrieved, the appellant is before this Tribunal.
9. Learned Counsel for the appellant inter alia submits that the cenvat credit availed under dispute, qualify as input service under Rule 2(l) of Cenvat Credit Rules and does not fall under exclusion clause. It is further urged that what is excluded is the service portion in the execution of a work contract and construction services including services listed under clause (b) of Section 66E of the Finance Act. However, repair and maintenance is specifically included, as the definition of input service specifically includes services used in relation to „modernization’, „renovation’ and „repair’ of a factory. Admittedly, in the facts of the present case, repair and maintenance have been done in the factory premises for which the construction services have been received. It is urged, even post the amendment in the definition of input service w.e.f. 01.04.2011, wherein the exclusion clause was introduced in the definition, still the „means clause’ continues to remain the same. The main clause is worded such as „directly or indirectly’ and „in or in relation to’, which further expands the scope of the definition. It is evident from the invoices for receiving of repair and maintenance service, which are of civil nature that these have been received for repairs of tiles (including tile fixing), floor repairing work, dismantling and fabrication of pipelines, installation of sliding door track, fabrication work relating to STP tank etc. Thus, none of the services received are in the nature of construction work as per the exclusion clause. Further such repair and maintenance are necessary for undertaking of manufacturing of dutiable finished product. Learned Counsel placed reliance on the precedent order of this Tribunal in appellant’s own case being Final Order No. 52128/2021-SM(BR) dated 08.07.2021 relating to similar dispute, wherein it was held that such services were in the nature of repair and maintenance work and does not involve any new construction undertaken by the appellant, hence eligible for cenvat credit. Reliance is also placed on the following rulings:-
i. Hindustan Zinc Ltd., vs. CCGST, F.O. No. 51617-51618/2021 dt. 22.06.2021.
ii. Hindustan Zinc Ltd., vs. CCE-2020 (8) TMI 2 –CESTAT, New Delhi.
iii. Hindustan Zinc Ltd., vs. CCE, Udaipur -2018 (3) TMI 102-CESTAT, New Delhi.
iv. Grasim Industries Ltd., vs. Commissioner of CGST & ST, CE & Cus-2020 (4) TMI 673 –CESTAT, New Delhi.
v. Bharat Oman Refineries Ltd., vs. CCE-2019 (2) TMI 746-CESTAT, New Delhi.
vi. CCE vs. Exide Industries Ltd., -2016 (43) STR 463 (Tri. Del.).
10. As regards the input credit of GTA service for transportation of input/fuel, it is urged that by the remand order-in-appeal dated 28.01.2019, the Adjudicating Authority was directed to ascertain whether service tax had actually been paid in respect of such invoices and accordingly allow the credit. The Assistant Commissioner have categorically recorded that service tax on the GTA service was charged and deposited by the consignor –SPPL. However, he has erred in observing that cenvat credit is admissible only to the consignor – SPPL. Thus, the said denial of credit is against the direction of the superior authority. It is further urged that cenvat credit is available to the receiver of service, if he is a manufacturer of dutiable goods or provider of taxable output service. Admittedly, in the facts of the present case, it is the appellant who is the receiver of input – GTA service utilised for transportation of fuel. Thus, under Rule 2(l) it is the appellant who is entitled to take credit of the same. It is immaterial as to who deposits service tax, either by the consignor or the consignee. Accordingly, he prays for allowing the appeal with consequential benefits.
11. It is urged that extended period of limitation is not invocable as there is no malafide or contumacious conduct. The transaction has been duly recorded in the books of accounts. Further the appellant have filed their return regularly.
12. Learned Authorised Representative appearing for the respondent relies on the impugned order.
13. Having considered the rival contentions, I hold that admittedly appellant have received the construction service towards repair and maintenance carried out in the factory premises. I find that repair and maintenance have been specifically provided as input service in the in the inclusive clause of the definition, which provides for credit with regard to services received for repair of a factory or office relating to such factory. Further, this issue is squarely covered by the precedent order of this Tribunal in appellant‟s own case (supra).
14. So far the input service on GTA service is concerned, I hold that admittedly it is the appellant manufacturer who are the receiver of the input service in question. I hold that it is immaterial as to who deposited the service tax, as it is specifically mentioned in the invoice of the supplier that service tax of GTA service has been deposited on the freight element. I also find that the Court below has held that service tax has been deposited in respect of GTA service in question. Accordingly, I hold that the appellant is entitled to cenvat credit on the same.
15. In view of my findings and observations, I set aside the impugned order and allow the appeal. The appellant is entitled to consequential relief in accordance with law.
(Pronounced on 27.09.2022).
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