Cenvat Credit on erection & installation of machines by Manufacturer

Cenvat Credit cannot be denied on erection and installation of machines by the Manufacturer as part of Input service and activities relating to business of the manufacturer

Hercules Hoists Ltd. (the Appellant) was a manufacturer of machinery and parts thereof which were cleared on payment of Excise duty. The Appellant had also taken the responsibility of installing the machinery at the customer’s premises. For the installation charges, the Appellant had claimed Cenvat credit of the installation charges so paid.

The Department alleged that the installation charges had been paid beyond the place of removal as the Appellant had cleared the machinery from the premises and these charges were not included in

the assessable value, therefore, the Appellant was not entitled for Cenvat credit of the installation charges.

Whereas the Appellant submitted that these services of erection andcommissioning of machinery was a part of their business activity as they are manufacturing the machinery and installing the same at the customer’s site. They are not charging any amount over and above the invoice price of the machinery for erection and installation charges from their customers. Therefore, whatever charges for erection and installation have been borne by them is Input service under Rule 2(l) of the Cenvat Credit Rules, 2004 (“the Credit Rules”).

Further the Department also denied the benefit of the Exemption Notification No. 22/2003-CX dated March 31, 2003 (“the Exemption Notification”) in respect of the goods cleared to the 100% EOU on production of CT-3 certificate as the Appellant was unable to produce the re-warehousing certificate within 90 days.

Both the lower Authorities confirmed the demand of duty and further imposed interest and penalty. Being aggrieved the Appellant preferred an appeal before the Hon’ble CESTAT, Mumbai.

The Hon’ble CESTAT, Mumbai relying upon the judgment of the Hon’ble High Court in the case of Commissioner of C. Ex., Nagpur Vs.Ultra Tech Cement Ltd. [2010 (260) ELT 369 (Bom)], wherein it was held that an assessee who is a manufacturer of excisable goods is entitled for Cenvat credit of the Input services availed by him in the course of their business, held that since the machinery was inoperative in the absence of erection and installation, the services availed by the Appellant for the erection and installation of machineries are part of the business and the Appellants was entitled for availing Cenvat credit on the same.

Further, in respect of denial of benefit of the Exemption Notification, the Hon’ble Tribunal held that although the Appellant was required to submit the re-warehousing certificate within 90 days which they failed to do, but at the same time the Department had not taken further steps to verify whether the re-warehousing certificate has been obtained or not to deny the benefit of the Exemption Notification.

Furthermore, since the facts were in the knowledge of the Department during the audit, the demand was set aside on the ground of being time barred.