Kohler India Corporation Private Limited vs C.C.E. & S.T (CESTAT Ahmedabad)
The facts of the case, in brief, are that a team of Central Excise Officers visited the factory premises of appellant and documents related to Cenvat Credit availed on services received from various service providers were called. Upon the examination of the appellant’s records/ documents it was noticed by the revenue authorities that the Appellant has received the services from various service provider for setting-up of factory. It appears that the Cenvat Credit on inputs used in the manufacture of prefabricated structure and Cenvat credit of input services on the taxable services such as Construction of Building, Erection Commissioning & Installation (Erection of Electric Tower From GEB to their factory premises) Architect Services, Real Estate Agent availed by the Appellant was inadmissible to them as they have no relation either directly or indirectly in the manufacture of finished goods. It also appears that Cenvat Credit of input services not available for construction of building whether pre-fabricated of steel structure or civil structure, immovable property, erection of electric tower and other services received by other service providers in respect of such services because the building, immovable neither subjected to the Central Excise Duty nor to the Service tax.
The revenue also observed that the credit taken by the appellant appears to be inadmissible in terms of Rule 3(1) and Rule 2 (1) of the Cenvat Credit Rules, 2004 according to which the input services should be used either for providing output service or should be used directly or indirectly by the manufacturer in relation to manufacture of excisable goods. However, in the instant case, the impugned services are used in construction of a civil structure and prefabricated steel structure which is attached to earth. The building of a Factory is neither an output service nor it is subjected to central excise duty nor to the service tax. These services are not used by the appellant as a manufacturer, whether directly or indirectly, in or in relation to manufacture of final products in as much as these services are used only for the construction of civil structure and pre-fabricated steel structure for their manufacturing plant, which is not subjected to excise duty nor to the service tax. Thus the Cenvat Credit does not appear to be admissible. A detail show cause notice dated 07.02.2012 was issued proposing denial of Cenvat Credit of Rs. 4,62,52,447/- on inputs services and to recover the ineligible Cenvat credit of Service Tax paid on the disputed input services along with applicable interest and penalty. The said show cause notice was adjudicated vide impugned order wherein the Learned Adjudicating Authority confirmed the entire demand of ineligible Cenvat credit along with interest under Rule 14 of the Cenvat Credit Rules read with Section 11A(1) of the Central Excise Act, 1944 and imposed equivalent penalty under Rule 15(2) of the Cenvat Credit Rules read with Section 11AC of the Central Excise Act, 1944. Therefore, the present appeal filed by the appellant.
CESTAT find that this appeal pertains to the period February 2008 to June 2009, the adjudicating authority decided the matter on the basis of old theory of law that services are related to the immovable properties hence Cenvat credit is not admissible. We find that subsequently, the various high courts and tribunals have given decisions in various judgments cited by the learned counsel for the appellant on this issue. The entire finding of the adjudicating authority is based on old theory of law and subsequently, much water was flown on the issue. We are of the view that the adjudicating authority needs to give a fresh look in the entire case in the light of the various judgements given subsequent to the passing of the impugned order.
CESTAT also find that the adjudication authority in respect of most of the services denied the credit on the ground that there is no nexus between the services with the manufacturing activity of appellant and clearance of the goods or for their business activity. We find that all the services per se are prima facie input services held in various judgments, however, the admissibility of Cenvat credit on these services can be decided on the basis that whether the services were used for the purpose specified in the definition of input service. Therefore, we are of the view that the entire matter needs to be re-considered
FULL TEXT OF THE ORDER OF ITAT AHMEDABAD
This appeal has been filed by M/s. Kohler India Corporation Pvt. Ltd. assailing the Order-in-Original [impugned order] dated 22-02-2013 passed by the Commissioner of Customs, Central Excise and Service Tax, Surat.
2. The facts of the case, in brief, are that a team of Central Excise Officers visited the factory premises of appellant and documents related to Cenvat Credit availed on services received from various service providers were called. Upon the examination of the appellant’s records/ documents it was noticed by the revenue authorities that the Appellant has received the services from various service provider for setting-up of factory. It appears that the Cenvat Credit on inputs used in the manufacture of prefabricated structure and Cenvat credit of input services on the taxable services such as Construction of Building, Erection Commissioning & Installation (Erection of Electric Tower From GEB to their factory premises) Architect Services, Real Estate Agent availed by the Appellant was inadmissible to them as they have no relation either directly or indirectly in the manufacture of finished goods. It also appears that Cenvat Credit of input services not available for construction of building whether pre-fabricated of steel structure or civil structure, immovable property, erection of electric tower and other services received by other service providers in respect of such services because the building, immovable neither subjected to the Central Excise Duty nor to the Service tax.
3. The revenue also observed that the credit taken by the appellant appears to be inadmissible in terms of Rule 3(1) and Rule 2 (l) of the Cenvat Credit Rules, 2004 according to which the input services should be used either for providing output service or should be used directly or indirectly by the manufacturer in relation to manufacture of excisable goods. However, in the instant case, the impugned services are used in construction of a civil structure and prefabricated steel structure which is attached to earth. The building of a Factory is neither an output service nor it is subjected to central excise duty nor to the service tax. These services are not used by the appellant as a manufacturer, whether directly or indirectly, in or in relation to manufacture of final products in as much as these services are used only for the construction of civil structure and pre-fabricated steel structure for their manufacturing plant, which is not subjected to excise duty nor to the service tax. Thus the Cenvat Credit does not appear to be admissible. A detail show cause notice dated 07.02.2012 was issued proposing denial of Cenvat Credit of Rs. 4,62,52,447/- on inputs services and to recover the ineligible Cenvat credit of Service Tax paid on the disputed input services along with applicable interest and penalty. The said show cause notice was adjudicated vide impugned order wherein the Learned Adjudicating Authority confirmed the entire demand of ineligible Cenvat credit along with interest under Rule 14 of the Cenvat Credit Rules read with Section 11A(1) of the Central Excise Act, 1944 and imposed equivalent penalty under Rule 15(2) of the Cenvat Credit Rules read with Section 11AC of the Central Excise Act, 1944. Therefore, the present appeal filed by the appellant.
4. Jigar Shah, Learned Counsel appeared on behalf of the Appellant submits that demand of Cenvat credit of service tax paid on various input services is not sustainable. The definition of input services as existed at relevant point of time includes the Services for setting up and modernization of factory and therefore, the appellant are eligible to claim Cenvat Credit of such services. It can be seen from the definition of input services under Rule 2(l) of Cenvat Credit Rules, 2004 that any service used for setting up of the factory or modernization of the factory is specifically covered in the definition of input services. He placed reliance on the following decisions.
