NU Vista Limited Vs Commissioner of Service Tax (CESTAT Kolkata)
CESTAT Kolkata allowed the appeal filed by NU Vista Limited (formerly Emami Cement Limited) against an order confirming Service Tax demands, interest and penalty.
The appellant had received various taxable services in connection with setting up its cement plant and availed CENVAT credit. The services included banking and financial services, management, maintenance and repair, rent-a-cab, GTA, legal consultancy, erection, commissioning and installation services. The Department denied credit of ₹57,68,603 on the ground that the expression “setting up” had been removed from the definition of “input service” with effect from 1 April 2011.
The appellant contended that it had not availed credit on civil works used for construction of the cement plant, but only on services otherwise covered under Rule 2(l) of the CENVAT Credit Rules, 2004. It relied upon the Tribunal’s decision in Bharat Coking Coal Ltd. on the eligibility of CENVAT credit for services used in setting up a factory.
CESTAT observed that the appellant had availed credit only on services such as banking and financial services, management, maintenance and repair, rent-a-cab, GTA, legal consultancy, and erection, commissioning and installation services, which were “input services” under Rule 2(l). The Tribunal therefore held that denial of credit merely because the services were used in setting up the cement plant was not sustainable.
Following Bharat Coking Coal Ltd. and Brahmani River Pellets Ltd., the Tribunal set aside the demand of ₹57,68,603.
The Tribunal also considered a demand of ₹2,67,077. The appellant had already paid ₹2,34,520, supported by a Chartered Accountant certificate. The remaining ₹32,557 represented CENVAT credit availed on debit notes relating to rent and reimbursement of electricity charges. Since the debit notes contained the details prescribed under Rule 4A of the Service Tax Rules, 1994, the Tribunal held that credit could not be denied. The balance credit of ₹32,557 was therefore allowed.
Regarding another demand of ₹85,692, the Tribunal found that the amount had already been paid by the appellant and appropriated it against the confirmed liability. It held that no penalty was imposable on this count.
The Tribunal further found that the appellant had sufficient balance in its CENVAT credit account and that the Service Tax demands were not sustainable. Accordingly, the demand of interest of ₹24,88,246 was set aside.
Since the demands were not sustainable, CESTAT also set aside the penalty of ₹61,21,372 imposed under Section 78 of the Finance Act, 1994.
Thus, CESTAT Kolkata held that NU Vista was eligible for CENVAT credit of ₹57,68,603 on services used in setting up the cement plant, allowed the balance ₹32,557 credit taken on debit notes, appropriated the amounts already paid, and set aside the interest and penalty. The appeal was disposed of on 5 March 2025.
Cases Discussed
- Bharat Coking Coal Ltd. v. Commissioner of Central Excise and Service Tax, Ranchi, Final Order No. 75645 of 2021 dated 07.10.2021 – CESTAT Kolkata
- B S Sponge Pvt. Ltd. v. CCE, Raipur, Final Order No. 50231/2019 dated 08.02.2019
- The Ramco Cements Limited – Order dated 11.10.2017
- Thiru Arooran Sugars v. CESTAT, Chennai – Order dated 10.07.2017
- Jawahar Mills Limited
- CCE v. Vimla Infrastructure India (P) Ltd.
- Brahmani River Pellets Ltd. v. Commissioner of CGST & CX, Rourkela, 2023 (10) TMI 287 – CESTAT Kolkata
- Gates Unitta Indian Company Pvt. Ltd. v. Commissioner of GST & Central Excise, Chennai, 2021 VIL 457 – CESTAT Chennai
- Tata Steel Ltd. v. Commissioner of C.Ex. & S.T., Jamshedpur, Final Order No. 76233 of 2024 dated 28.06.2024 – CESTAT Kolkata
FULL TEXT OF THE CESTAT KOLKATA ORDER
M/s. NU Vista Limited (formerly known as ‘M/s. Emami Cement Limited), DLF IT Park 1, Tower C, 10th Floor, 08, Major Arterial Road, New Town (Rajarhat), Kolkata – 700 156 [hereinafter referred to as the “appellant”] were issued a Show Cause Notice dated 17.10.2014 inter alia demanding Service Tax, including cess, as follows: –
(i) Rs.57,68,603/- under proviso to Section 73(1) of the Finance Act, 1994 read with Rule 14 of the CENVAT Credit Rules, 2004.
(ii) Rs.2,67,077/- under proviso to Section 73(1) of the Finance Act, 1994 read with Rule 14 of the CENVAT Credit Rules, 2004.
(iii) Rs.96,284/- under proviso to Section 73(1) of the Finance Act, 1994 read with Rule 14 of the CENVAT Credit Rules, 2004.
1.1. On adjudication, the Ld. Commissioner of Service Tax, Service Tax-II Commissionerate, Kolkata has confirmed the demands of Rs.57,68,603/-, Rs.2,67,077/- and Rs.85,692/- against the appellant and imposed Rs.61,21,372/- as penalty under Section 78 of the Finance Act, 1994. He also ordered for payment of interest by the appellant, amounting to Rs.24,88,246/- under Section 75 of the Finance Act, 1994.
2. Aggrieved by the confirmation of the said demands, the appellant has filed this appeal.
3. In respect of the demand of Service Tax of Rs.57,68,603/-, the appellant submits that the Department has considered the availment of CENVAT Credit in respect of setting up of cement plant as ‘irregular’ on the ground that the expression “setting up” has been omitted from the definition of “input service” w.e.f. 01.04.2011. In this regard, the appellant points out that they have taken CENVAT Credit in respect of only such taxable services which are eligible for CENVAT Credit; they have not taken CENVAT Credit in respect of civil works used in the construction of the cement plant. The appellant submits that they have availed CENVAT Credit in respect of services such as banking and other financial services, management, maintenance and repair services, rent-a-cab services, GTA services, legal consultancy services, erection, commissioning and installation services, etc., which are otherwise eligible for availment of CENVAT Credit as input service credit in terms of Rule 2(l) of the CENVAT Credit Rules, 2004. Accordingly, the appellant submits that deleting of the expression “setting up of a plant” has nothing to do with the availment of CENVAT Credit in respect of the above said services in the present case. The appellant has further submitted that the issue is no longer res integra as this Tribunal has already decided this issue in favour of the appellant, in the case of M/s. Bharat Coking Coal Ltd. v. Commissioner of Central Excise and Service Tax, Ranchi [Final Order No. 75645 of 2021 dated 07.10.2021 in Excise Appeal No. 77734 of 2018 – CESTAT, Kolkata]. In view of the above, the appellant submits that they are eligible for availment of CENVAT Credit of Rs.57,68,603/- in respect of the above said services which are used in setting up of the cement plant. 3.1. Regarding the demand of Service Tax of Rs.2,67,077/-, the appellant submits that they have already paid Service Tax of Rs.2,34,520/ – and enclosed a Chartered Accountant certificate to that effect. Regarding the balance amount of Rs.32,557/-, the appellant submits that they have availed CENVAT Credit of Rs.32,557/- on Debit Notes for rent (reimbursement of electricity charges). The appellant submits that the Debit Notes contain all details as prescribed under Rule 4A of Service Tax Rules, 1994. In support of their contention that CENVAT Credit is allowable on the basis of Debit Notes, the appellant relied upon the decision in the case of Gates Unitta Indian Company Pvt. Ltd. Vs Commissioner of GST & Central Excise, Chennai reported in 2021 VIL 457 CESTAT CHE-ST. In this regard, the appellant also submits that this issue is no more res integra as the Tribunal has allowed the credit availed on the basis of debit notes issued, in the case of M/s. Tata Steel Ltd. v. Commissioner of C.Ex. & S.T., Jamshedpur [Final Order No. 76233 of 2024 dated 28.06.2024 in Excise Appeal No. 75590 of 2014 – CESTAT, Kolkata]. Accordingly, the appellant submits that they are eligible for the availment of the balance CENVAT Credit to the extent of Rs.32,557/-.
3.2. In respect of the demand of Service Tax of Rs.85,692/-, the appellant has submitted that they have already paid Service Tax on this count vide GAR Challan dated 03.08.2012 (wrongly mentioned by the Ld. Commissioner as 08.03.2012) and hence, the demand confirmed on this count is not sustainable.
3.3. With regard to the demand of interest amounting to Rs.24,88,246/-, it has been submitted by the appellant that they were always having excess CENVAT Credit lying in their CENVAT Credit account over and above the credit availed and utilised by them. Further, they submit that the service tax demand confirmed in the impugned order is not sustainable; When the demand of service tax is not sustained, the question of demanding interest does not arise. Accordingly, they prayed for setting aside the demand of interest confirmed in the impugned order.
4. The Ld. Authorized Representative of the Revenue has reiterated the findings in the impugned order.
5. Heard both sides and perused the appeal records.
6. Regarding the demand of Service Tax of Rs.57,68,603/-, we observe that this amount has been confirmed in the impugned order by denying the CENVAT Credit availed by the appellant on the input services used setting up of cement plant, on the ground that the words “setting up” have been removed from the definition of “input service” w.e.f. 01.04.2011. However, we find that the appellant has not availed credit in respect of civil works undertaken by them for setting up of the plant. They have only availed the credit in respect of services such as banking and other financial services, management, maintenance and repair services, rent-a-cab services, GTA services, legal consultancy services, erection, commissioning and installation services, etc., which are all “input services” in terms of Rule 2(l) of the CENVAT Credit Rules, 2004. Thus, we find that the appellant is eligible to avail CENVAT Credit in respect of the above said services.
6.1. We observe that this view is supported by the decision of this Tribunal in the case of M/s. Bharat Coking Coal Ltd. v. Commissioner of Central Excise and Service Tax, Ranchi [Final Order No. 75645 of 2021 dated 07.10.2021 in Excise Appeal No. 77734 of 2018 – CESTAT, Kolkata] wherein it has been observed as under: –
“7. We thus find that services used for setting up of the factory even after 01.04.2011 would be eligible for credit. The Ld. Commissioner has allowed credit on certain invoices assuming the same to be pure services and disallowed the credit on remaining portion by considering the same to be in the nature of civil portion. We find that this Tribunal has been consistently applying the user test to decide the credit eligibility as laid down by the Hon‟ble Supreme Court. The Tribunal in B S Sponge Pvt Ltd vs. CCE, Raipur (Final Order no. 50231/2019 dated 08.02.2019) while considering the “user test principle” as laid down by the Supreme Court observed as follows:-
“5. After hearing both the parties and keeping in view the various Orders at each stage of this litigation and the case law as relied upon by the appellant, I am of the opinion that the issue has been dealt by various adjudicating authorities and it has now been clearly settled that structures like Ms angle, Ms channels, Ms joists, chequered plates or similar steel structures used in fabrication of supporting structures if are merely the civil structures for supporting the machines/ apparatus used in manufacture of final product stands excluded from the definition of capital goods. But if such structures satisfies the “user test” principle as appreciated by Hon’ble Apex Court in Rajasthan Spinning & Weaving Mills Ltd. (supra) case, all these structural items are as good as spare parts of the capital goods as mentioned in Clause 3 of Section 2(a) of Cenvat Credit Rules, 2004 and thus are eligible inputs/ capital goods for availing credit. The final product in the present case is the sponge iron for which the kiln, burning chamber, conveyor gallery, fabrication of walkways of platform, staircases, shed, etc. are the essential machineries. As per appellant, none of these machinery can put to use unless and until the impugned structure is there to support the said machinery as the machinery cannot be held suspended in the air. Thus, these structures are not merely the structural support to these machines but very much become the integral part of these machines manufacturing the final product.
The perusal of earlier Order -in-Original reflects that the Department had initially observed that, all the machines in sponge iron plant can become operational or can function only when the design and layout parameters are met. Such design and layout parameters specify the location, height, angle of inclination of the machines and alignment with other related machinery so that the desired result are obtained from the machinery. The kiln, cooler, hopper or material handling system in a sponge of iron plant cannot be suspended in air. Only the structural support for all these machines can facilitate the desired location, height, angle of inclination of the machine. In the absence of the structural support neither the machine can be installed nor it can function nor it can be aligned with other related machinery to produce desired results.”…
8. We also find that the user test principles have also been recently followed by the Hon’ble Madras High Court in the case of The Ramco Cements Limited (in Order dated 11.10.2017) wherein the Hon’ble High Court followed its earlier decision dated 10.07.2017 in Thiru Arooran Sugars vs. CESTAT, Chennai. While placing reliance on the Hon’ble Supreme Court’s decision in Jawahar Mills Limited’s case, the High Court reiterated the legal position to hold that steel and cements used for the purpose of construction of plant comprising of concrete foundations, concrete silos for storing raw materials, clinker and cement, heater tower structure, etc cannot be said to have been used for civil construction but for the construction which are absolutely necessary for establishing a manufacturing unit. Further, the Hon’ble Chhattisgarh High Court in the case of CCE vs. Vimla Infrastructure India (P) Ltd (Supra), while taking note of various other High Court decisions, has ruled that the assessee is entitled to avail credit on construction of railway siding which is used for providing cargo handling services during the period covered under the amended Cenvat Credit Rules post 01.04.2011.
In view of the decisions of the various High Courts and the Tribunal wherein the user test principle has consistently been followed, we are of the view that Cenvat availed by the appellant for setting up of CHP, which is used for evacuation of coal by rapid loading process, cannot be legally denied.”
6.2. The same view has also been expressed by the Tribunal in the case of M/s. Brahmani River Pellets Ltd. v. Commissioner of C.G.S.T. & C.X., Rourkela [2023 (10) TMI 287 – CESTAT, Kolkata].
6.3. In view of the above discussions above and by following the decisions cited above, we hold that the denial of CENVAT Credit on the input services used in setting up of the plant, is not sustainable. Accordingly, we set aside the demand of Rs.57,68,603/- confirmed in the impugned order.
7. Regarding the demand of Service Tax of Rs.2,67,077/-, we observe that the appellant have already paid Service Tax of Rs.2,34,520/ – and enclosed a Chartered Accountant certificate to that effect. Regarding the balance amount of Rs.32,557/-, the appellant submitted that they have availed Cenvat credit of Rs.32,557/- on Debit Notes for rent ( reimbursement of electricity charges). We observe that the Debit Notes contain all details as prescribed under Rule 4A of Service Tax Rules, 1994. Accordingly, we hold that the Cenvat credit availed by the appellant on the basis of ‘Debit Notes’ cannot be denied. In support of this findings, we rely upon the decision in the case of Gates Unitta Indian Company Pvt. Ltd. Vs Commissioner of GST & Central Excise, Chennai reported in 2021 VIL 457 CESTAT CHE -ST. We also observe that this issue is also no more res integra as the Tribunal has allowed the credit availed on the basis of debit notes issued, in the case of M/s. Tata Steel Ltd. v. Commissioner of C.Ex. & S.T., Jamshedpur [Final Order No. 76233 of 2024 dated 28.06.2024 in Excise Appeal No. 75590 of 2014 – CESTAT, Kolkata] wherein it has been held as under:-
“6.1. Moreover, the debit notes issued by the service provider contains all the details required in terms of Rule 9 of the CENVAT Credit Rules, 2004, to avail CENVAT Credit. In these set of facts, we hold that the CENVAT Credit cannot be denied to the appellant.”
7.1. Accordingly, we hold that the appellant are eligible for the availment of the balance CENVAT Credit to the extent of Rs.32,557/-.
8. Regarding the amount of Rs.85,692/- confirmed in the impugned order, we observe that the same has already been paid by the appellant and therefore, the same is appropriated against the demand confirmed. We hold that no penalty is imposable on the appellant on this count.
9. Regarding the demand of interest amounting to Rs.24,88,246/-, we find that the appellant was having sufficient balance in their CENVAT Credit account. Further, we observe that the service tax demand confirmed in the impugned order is not sustained. Accordingly, we hold that the demand of interest confirmed in the impugned order is not sustainable. Thus, we set aside the demand of interest of Rs.24,88,246/- confirmed in the impugned order.
10. Since the demands confirmed in the impugned order are not sustainable, we hold that no penalty is imposable on the appellant. Accordingly, the penalty of Rs.61,21,372/- imposed in the impugned order under Section 78 of the Finance Act, 1994 is set aside.
11. In view of the above, we pass the following order: –
(i) The appellant is eligible for the CENVAT Credit of Rs.57,68,603/- availed in respect of setting up of the cement plant.
(ii) The demand of Rs. 2,34,520/-, being already paid by the appellant, is upheld and appropriated. The balance amount of credit of Rs.32,557/- availed on the basis of debit notes is held as eligible and accordingly, the demand to this extent is set aside.
(iii) Regarding the demand of Rs.85,692/-, the amount being paid by the appellant, is appropriated against the liability confirmed.
(iv) The demand of interest of Rs.24,88,246/- is set aside.
(v) No penalty is imposable on the appellant.
12. The appeal is disposed of thus.
(Order pronounced in the open court on 05.03.2025)
