Bharat Coking Coal Ltd. Vs Commr. of Central Excise & S. Tax (CESTAT Kolkata)
The issue before us is whether credit is available on Coal Handing Plant (CHP), which has been set up by the appellant for evacuation of coal from its mining premises.
Purpose of setting up of the CHP is to load the coal into the railway wagons in an automated manner after the coal is crushed into the desired size. It is not in dispute that the services used by the appellant is for modernisation of the coal loading process. The definition of input service specifically include services received by a manufacturer for modernisation of a factory. We have also perused the decision of the Tribunal in the case of Pepsico India Holdings (P) Ltd (supra) relied upon by the appellant. The Tribunal has observed that without setting up of the factory, there cannot be any manufacture and the mere fact that the words „setting up of factory” has not been retained in the definition of input services post 01.04.2011, the same will not mean that the benefit of credit has been taken away by the legislature.
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.
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.
Further, the said CHP has been set up with the view to „modernise the coal loading process in the mines’ also satisfies the definition of input service. Moreover, since the credit has been allowed by the Department on certain invoices raised by the Contractor, the Department has in-principle found the service to be eligible for credit. We also agree with the submission made by the appellant that the mode of valuation adopted by the Contractor to discharge service tax on 40% of the contract value is in accordance with law contained in Service Tax Valuation Rules and cannot be disputed while deciding credit eligibility at the appellant’s end. When service tax has been levied only on 40% of the total value, it essentially means that service tax has been paid only on the service portion.
In view of the reasons stated above, the impugned demand order cannot be sustained and hence, the same is set aside.
FULL TEXT OF THE ORDER OF ITAT KOLKATA
The present appeal has been filed by M/s. Bharat Coking Coal Limited, assailing the Adjudication Order dated 28.03.2018 passed by the Ld. Commissioner, CGST & CX, Ranchi, whereby the Cenvat Credit of Rs.5,92,50,563/- has been denied on the services availed for setting up of Coal Handling Plant for the period from June 2013 to November 2015. The Ld. Commissioner has also imposed equivalent penalty and applicable interest.
2. Briefly stated the facts of the case are that the appellant is a subsidiary of Coal India Limited, a PSU, engaged in the business of mining and selling of coal at its mines located in the State of Jharkhand. In order to modernise the coal loading process so as to facilitate coal loading within shortest possible time with the most advanced automated system, the appellant awarded contract to one, M/s. S K Samanta & Co. (the Contractor), for the work of “Planning, Designing, Engineering, Construction, Fabrication, Supply, Erection, Trial Run, Commissioning and Testing of Coal Handling Plant (CHP) of 5.0 Mtpa capacity with loading arrangements through „SILO’ consisting of all Civil, Structural, Electrical and Mechanical works and all other accessories and facilities required to make it complete in all respect along with approach road on Turn-Key basis”.
The Contractor in his invoices charged service tax on 40% of the total value of contract inclusive of goods and services in compliance with Rule 2A of the Service Tax (Determination of Value) Rules, 2006 for discharging his service tax liability, of which the appellant availed Cenvat credit under Rule 2(l) of the CENVAT Credit Rules, 2004. The Ld. Commissioner in the impugned order has disputed the said valuation to deny the credit to the appellant. He has observed in para no. 5.6 to para 5.8 of the impugned order that the subject contract is pre-dominantly for construction of structural works in order to bring into existence the Coal Handling Plant including SILO which falls under the exclusion clause of input service. He has also observed that the service tax reimbursed by appellant against exclusive supply of goods for construction of SILO cannot be defined as „input service’.
3(i). The Ld. Advocate for the appellant submitted that the Commissioner has disputed the payment of service tax by the service provider on 40% of the total contract value including goods and services. He submitted that the Ld. Commissioner has failed to appreciate that the appellant has no control on the value to be adopted by the Contractor, i.e. service provider, for payment of service tax. He relied on the following decisions to submit that availment of credit cannot be disputed by the Department at the recipient’s end when the valuation has not been disputed at service provider or manufacturer/supplier’s end:-
