Case Law Details
Commissioner of Central Excise And Service Tax Vs Pipavav Shipyard Limited (Gujarat High Court)
Conclusion: Fabrication of various cranes which were embedded to earth could be treated as excisable goods within the meaning of Capital Goods defined in Cenvat Credit Rules, 2004 and the Cenvat Credit availed of Inputs/Capital Goods like HR Plates, MS Flats, MS Coils, Wire Ropes, Rail, Welding Electrode and input services used for fabrication of these cranes was admissible to the assessee as these were used in relation to the manufacturing of final products whether directly or indirectly.
Held: Assessee was a 100% Export Oriented Unit (EOU) engaged in the business of manufacturing of ships, providing ship repair, management and maintenance services. For its manufacturing and ship repair services activity, assessee-company was required to construct/ fabricate several cranes. Such cranes were used for the purpose of heavy, medium and light lifting and transporting of the constructed blocks or even lifting of the entire vessel. These cranes were used in the ship building and repairing and they run on tracks fitted to the ground, in and around the Dry Dock. All these items purchased by assessee company were liable for excise duty and service tax. The issue arose for consideration was whether the fabrication of various cranes which were embedded to earth could be treated as excisable goods within the meaning of Capital Goods defined in Cenvat Credit Rules, 2004 and the Cenvat Credit availed of Inputs/ Capital Goods like HR Plates, MS Flats, MS Coils, Wire Ropes, Rail, Welding Electrode and services used for fabrication of these cranes was admissible to assessee. It was held so long as the inputs were “used in or in relation to the manufacture of final products whether directly or indirectly and whether contained in the final product or not”, the cenvat credit could be claimed in respect of the excise duty paid on them. HR Plates, MS Flats, MS Coils, Wire Ropes, Rail, Welding Electrode were components of cranes since they are used in the fabrication of cranes. These items were therefore capital goods by virtue of Rule 2(a) (A)(iii) of the Cenvat Credit Rules, 2004. Thus, the aforesaid items (i.e. HR Plates, MS Flats, MS Coils, Wire Ropes, Rail, Welding Electrode) being capital goods, the cenvat credit of excise duty paid thereon could not be denied in view of Rule 3(1) read with Rule 2(a)(A) of the Cenvat Credit Rules, 2004. In any case, looking to the definition of “excisable goods” as contained in Section 2(d) of the Central Excise Act, 1944 read with Chapter 84 (Tariff Item 8426) of the First Schedule to the Central Excise Tariff Act, 1985 cranes are excisable goods.“Input service” used in the fabrication of cranes which were essential for the manufacture of ships would be covered by the wide definition of input services. Moreover, the said definition of “input services” was wide enough to cover even “services used in relation to setting up, modernization, renovation or repairs of a factory” as well as “services used in relation to…. activities relating to business”. Therefore, services for setting up a factory and any activity relating to business were specifically included within the definition. The Cranes being part of the factory of assessee where the ships were manufactured and their fabrication being an activity relating to assessee’s business, services used for fabrication thereof would be covered within the meaning of “input services”. Hence also, cenvat credit of service tax paid on such services availed by assessee must be allowed.
FULL TEXT OF THE HIGH COURT ORDER /JUDGEMENT
1. Since the questions of law in both the appeals are common, those were heard analogously and are being disposed of by this common judgment and order.
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