Solvay Specialities India Pvt Ltd Vs C.C.E. & S.T. (CESTAT Ahmedabad)
CESTAT Ahmedabad held that services related to pollution control of the factory is covered within the term ‘input services’ as per rule 2(l) of Cenvat Credit Rules, 2004 and hence eligible for cenvat credit.
Facts- The appellant in the month of May 2006 acquired Polymer Division of factory of Gharda Chemicals Ltd. The appellant obtained central excise registration on 16.05.2006 and undertook manufacture of excisable goods of Chapter 39 of the Central Excise Tariff at the said factory. The other two appellant are employees of the appellant company M/s. Solvay Specialities India Pvt Ltd. For the purpose of acquiring the said factory, the appellant commissioned the services of technically qualified environmental consultancy firm called Environmental Resources Management, Belgium (ERM) for carrying out “Environmental due diligence Auditing” of the site for investigation of environmental impact by way of contamination of the soil and ground water. However the report of said Environmental due diligence Audit was also required for obtaining the consent and no objection of the Gujarat Pollution Control Board to the acquisition of the said factory by the appellant.
For the service of conducting Environmental due diligence Audit the investigation into the presence and extent of soil and ground water contamination and preparing the report with suggested remedial measures. The said ERM raised their invoices dated 19.12.2006. The appellant took the cenvat credit of service tax of Rs. 54,94,329/- on the said service. Further for the service of carrying out and implementing the remedial measures during 2008 -2009 onwards, the service provider charge the service tax of which the appellant took cenvat credit amounting to Rs 55,81,531/- and Rs. 50,37,560.
Show cause notice was issued proposing denial of cenvat credit of Rs. 3,61,594/- paid on inputs such as TMT Bars, Steel Support Structure, Joists, Beams, Angles, Channels, and MS Angles etc. on the ground that same neither be considered as capital goods nor inputs. A demand for duty of Rs. 6,38,766/- on wasrte & Scrap of Capital goods was also proposed. The demand proposed in the show cause notices were confirmed therefore, the present appeals.
Conclusion- The services which are in relation to pollution control of the factory, the same are input services in terms of Rule 2 (l) of Cenvat Credit Rules, 2004 and hence, eligible for cenvat credit.
It is a settled law that even though the services were received prior to the commencement of production so long it is in relation to the manufacturing activity of the assessee, the cenvat credit cannot be denied only because the same were received prior to acquisition of the factory and/ or commencement of the production.
In the light of Hon’ble High Court of Chhattisgarh in Vandana Global Ltd – 2018 (16) GSTL 462 it is held that cenvat credit on various steel items such as TMT Bars, Steel Support Structure, Joists, Beams, Angles, Channels, and MS Angles etc is duly admissible.
FULL TEXT OF THE CESTAT AHMEDABAD ORDER
In this appeal the following issues are involved:-
1. The principal issue in the present appeal is whether the services of environmental due diligence audit of the factory site for investigation of soil and ground water contamination and services of consequential remedial action qualify as input services within the meaning of Rule 2 (l) of Cenvat Credit Rules, 2004 for the period 2007-2008 to August 2012.
2. Whether the appellant is entitled for cenvat credit of duty paid on the inputs such as TMT Bars, Steel Support Structure, Joists, Beams, Angles, Channels, and MS Angles etc. used for support structure of capital goods in the factory of the appellant.
3. Whether the demand of duty on the clearance of MS Scarps and scrape of capital goods is correct and legal in terms of Rule 3 (5A) of Cenvat Credit Rules, 2004.
4. Whether Show cause notices are barred by limitation.
1.2 The brief facts of the case are that the appellant in the month of May 2006 acquired Polymer Division of factory of Gharda Chemicals Ltd. The appellant obtained central excise registration on 16.05.2006 and undertook manufacture of excisable goods of Chapter 39 of the Central Excise Tariff at the said factory. The other two appellant are employees of the appellant company M/s. Solvay Specialities India Pvt Ltd. For the purpose of acquiring the said factory, the appellant commissioned the services of technically qualified environmental consultancy firm called Environmental Resources Management, Belgium (hereinafter ERM) for carrying out “ Environmental due diligence Auditing” of the site for investigation of environmental impact by way of contamination of the soil and ground water. However the report of said Environmental due diligence Audit was also required for obtaining the consent and no objection of the Gujarat Pollution Control Board to the acquisition of the said factory by the appellant.
1.3 For the service of conducting Environmental due diligence Audit the investigation into the presence and extent of soil and ground water contamination and preparing the report with suggested remedial measures. The said ERM raised their invoices dated 19.12.2006. The appellant on 11.06.2007 took the cenvat credit of service tax of Rs. 54,94,329/- on the said service. Further for the service of carrying out and implementing the remedial measures during 2008 -2009 onwards, the service provider charge the service tax of which the appellant took cenvat credit amounting to Rs 55,81,531/- and Rs. 50,37,560. In February 2009, the Central Excise Officer visited the appellant’s factory and carried out investigation which resulted in issuance of show cause notice dated 08.06.2007 and subsequent show cause notice dated 17.01.2013. In the show cause notice dated 08.06.2011. it was also proposed to deny the cenvat credit of Rs. 3,61,594/- paid on inputs such as TMT Bars, Steel Support Structure, Joists, Beams, Angles, Channels, and MS Angles etc. on the ground that same neither be considered as capital goods nor inputs. A demand for duty of Rs. 6,38,766/- on wasrte & Scrap of Capital goods was also proposed. Both the show cause notices were adjudicated vide orders dated 20.02.2013 and 20.03.2014 whereby the demand proposed in the show cause notices were confirmed therefore, the present appeals.
2. Shri J. C patel learned counsel along with Shri Rahul Gajera appearing on behalf of the Appellant submits that the services of Environmental due diligence Audit the investigation of presence and extent of soil and ground water contamination and suggesting and carrying out remedial measures to comply with pollution control laws are clearly in relation to manufacture of final product and therefore eligible for cenvat credit as input service. He submits that the service is clearly covered under the meaning of input service given in Rule 2 (l) of CCR, 2004. He submits that these services are essential to comply with the pollution control law and without obtaining the requisite permission and consent from the pollution control authority , manufacture of final products cannot be undertaken. Therefore, the services in question are necessary for carrying out the production activity in the appellant’s factory. In support he placed reliance on the following judgments:-
