Case Law Details
KCP Ltd. Vs Commissioner of Central Tax Guntur (CESTAT Hyderabad)
The appeal concerns the eligibility of Cenvat Credit on input services used for setting up a cement manufacturing unit and whether such credit can be denied when invoices, payments, and credit availment occur after a statutory amendment, even though the services were rendered prior to the amendment date. The appellant, engaged in manufacturing cement and clinker, established a new production unit in Andhra Pradesh and awarded contracts for civil construction, engineering, fabrication, and erection works. The construction was completed and commercial production commenced in March 2011. However, certain invoices for services rendered prior to 31.03.2011 were raised later due to reconciliation of accounts, and the appellant availed Cenvat Credit during April 2011 to February 2012 under Rule 4(7) of the Cenvat Credit Rules, 2004.
The adjudicating authority denied credit amounting to Rs. 56,40,148 on the ground that there was insufficient documentary evidence to prove that the services were completed before 01.04.2011. It was further held that, following Notification No. 3/2011-CE(NT) effective from 01.04.2011, services relating to works contract were excluded from the definition of input services, and therefore ceased to be eligible for credit.
The appellant contended that the services had indeed been completed prior to 01.04.2011 and relied on Circular No. 943/04/2011-CX dated 29.04.2011, which clarified that credit would be admissible if services were provided before the amendment date, even if invoices or payments were made later. The appellant also pointed to the commencement of production in March 2011 and ER-1 returns as evidence of completion of services, along with confirmation from contractors and prior intimation to the department.
The Tribunal identified the central issue as whether Cenvat Credit is admissible when services were rendered before 01.04.2011, but invoicing and payment occurred subsequently. It held that the dispute hinges on the date of provision of service rather than the date of invoicing. Based on records, including production commencement and contractor confirmations, it concluded that services were completed before the cut-off date.
The Tribunal observed that prior to amendment, Rule 2(l) of the Cenvat Credit Rules explicitly included services used in relation to setting up a factory. Therefore, if services were rendered before 01.04.2011, the credit was validly earned. It further held that a beneficial credit validly earned under existing law cannot be denied retrospectively unless expressly provided. Rule 4(7) allows credit to be taken upon receipt of invoice, thereby recognizing delay in invoicing or payment as a procedural aspect rather than a substantive ground for denial.
The Tribunal also relied on the CBEC Circular, which clarified that credit remains available for services rendered prior to 01.04.2011, even if payment is made later, and noted that the department is bound by its own circulars. It referred to multiple Tribunal decisions that consistently held that credit eligibility depends on the date of service completion, not the date of invoicing or payment.
In view of these findings, the Tribunal held that the services in question were completed prior to 01.04.2011 and were covered under the pre-amended definition of input service. The credit was availed in accordance with Rule 4(7), supported by circulars and precedents. Accordingly, the denial of credit, along with demand, interest, and penalty, was found to be unsustainable. The impugned order was set aside, and the appeal was allowed with consequential relief.
FULL TEXT OF THE CESTAT HYDERABAD ORDER
M/s KCP Ltd., (hereinafter referred to as appellant) has filed this appeal against the Order-in-Original No. 77/2012-C.Ex dated 30.08.2012, whereby, Learned Adjudicating Authority confirmed the demand, interest and imposed penalty (impugned order).
2. The fact, in brief, is that the appellant is, inter alia, engaged in the manufacture of OP Cement and Clinker falling under Central Excise Tariff heading No. 25232910 and 25231000 respectively. The appellant have established a new cement production unit at Muktyala (V), Jaggaiahpet (M), Krishna District, Andhra Pradesh. For setting up of new cement production unit, the appellant have awarded the work of execution of civil works, detailed mechanical engineering, structural and mechanical fabrication and erection works to M/s L & T Ltd. The construction of factory has been completed and commercial production has been commenced in the month of March, 2011. However, M/s L & T Ltd., has raised certain bills for the work completed before 31.03.2011 as reconciliation of the material, accounts was completed. Accordingly, the appellant availed the Cenvat Credit during the impugned period April, 2011 to February, 2012 in respect of the bills raised during such period in accordance with Rule 4(7) of Cenvat Credit Rules, 2004 (CCR) on payment basis.
3. The Learned Commissioner of Customs, Central Excise and Service Tax, Guntur vide impugned order denied the Cenvat Credit availed amounting to Rs. 56,40,148/- on the grounds that the said work contract service cannot be considered as completed before 01.04.2011 in absence of documentary evidence. It is not a pre-requisite that entire work relating to construction, erection and commissioning of the unit is to be completed before the trial production of clinker. The input service shall cease to be cenvatable input service in accordance with Notification No. 3/2011-CE(NT) dated 01.03.2011 with effect from 01.04.2011 as the input services excludes the services specified under Section 65(105)(zzzza) of the Finance Act.
4. Learned Counsel for the appellant submits that during the disputed period, the Cenvat Credit was rightly eligible in accordance with Serial No. 12 of Circular No. 943/04/2011-CX dated 29.04.2011 as the services from M/s L & T Ltd., were completed prior to 31.03.2011 and the same can be evidenced by the fact that the production commenced during the March 2011 and the fact has already been informed to the Department by the appellant.
5. Learned AR reiterates the findings of Adjudicating Authority.
6. Heard both the sides and perused the records.
7. The issue is whether Cenvat Credit is admissible on services used for setting up of a factory, where services were rendered prior to 01.04.2011, but invoices/payments and credit availment occurred thereafter.
8. The entire dispute relates upon the date of provision of service and not the date of invoicing. It is clear from the records that production of clinker commenced in March, 2011, ER-1 returns substantiate the production. The contractors have confirmed completion of works prior to 01.04.2011 and appellant had duly informed to the Department. In definition of input service of Rule 2(l) of CCR prior to amendment explicitly included “services used in relation to setting up of a factory”. Thus, eligibility of credit is undisputed, if services were rendered prior to 01.04.2011.
9. It is a settled law that a beneficial credit validly earned under existing law cannot be taken away retrospectively unless explicitly provided. Rule 4(7) of CCR provides that the Cenvat Credit in respect of input service shall be allowed, on or after the day on which the invoice, bill/ as the case may be, challan referred to in Rule 9 is received.
10. Therefore, delay in invoicing/ payment is statutorily recognized. Thus, availment after 01.04.2011 is procedural consequence not substantive denial.
11. CBEC Circular No. 943/04/2011-CX dated 29.04.2011 also clarified that credit shall be available if services were provided before 01.04.2011, even if payment is made later. It is settled by Hon’ble Supreme Court in the case of Ramade Micro Nutrients [1996 (87) ELT 19 (SC)] and Paper Products Ltd., [1999 (112) ELT 765 (SC)] that the Department is bound by it’s own circulars.
12. CESTAT, Hyderabad and other Tribunals in the following cases:
i) Pepsico India Hoding Pvt Ltd., Vs Commissioner of Central Tax, Tirupati [2021 (7) TMI 1094 (CESTAT-Hyd)]
ii) BASF and Shri Chandra Shekar Khate Vs CCE & ST, Vadodara – II [2023 (1) TMI 54 (CESTAT- Ahmd)]
iii) M/s Bharat Cooking Coal Ltd., Vs Commissioner of Central Excise, Customs & Service Tax, Ranchi [2021 (10) TMI 381 (CESTAT-Kol)]
iv) M/s Aaditya Aluminium Vs Commissioner of Central Excise, Customs & Service Tax, Bhubaneswar [2023 (9) TMI (CESTAT-Kol)]
v) M/s Brahmani River Pellets Ltd., Vs Commissioner of GST & CX, Rourkela [2023 (10) TMI 287 (CESTAT- Kol)]
vi) M/s Saint Gobain Glass India Ltd., Vs Commissioner of Central Excise & Service Tax [2023 (11) TMI 522 (CESTAT-Chennai)]
uniformally held that credit is admissible when services were completed prior to 01.04.2011, irrespective of billing/payment date. Therefore, the issue is no longer res-integra.
13. In view of the above discussion, it is clear from the facts that services were completed prior to 01.04.2011 and covered under pre-amended definition. Appellant taken credit as provided under Rule 4(7) of CCR. It is also supported by Circular and binging precedents.
14. In view of the above, the impugned order is not legally sustainable and liable to be set aside.
15. Therefore, impugned order is set aside and the appeal is allowed with consequential relief, if any, as per law.
(Pronounced in open court on 09.04.2026)
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