Custom, Excise & Service Tax Tribunal
Cetex Petrochemicals Ltd vs Chennai-Iii on 8 January, 2025
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL
CHENNAI
REGIONAL BENCH - COURT No. I
Excise Appeal No. 41659 of 2016
(Arising out of Order-in-Original No.41/ 2016 (CE) dated 29.04.2016 passed by
Commissioner of Central Excise, Chennai - III)
M/s. Cetex Petrochemicals Limited ...Appellant
Manali, Chennai - 600 068.
Versus
The Commissioner of CGST & Central Excise ...Respondent
Chennai North Commissionerate No.26/1, Mahathma Gandhi Road, Nungambakkam, Chennai 600 034.
APPEARANCE :
Shri V. Ravindran, Advocate for the Appellant Shri M. Selvakumar, Authorised Representative for the Respondent CORAM :
HON'BLE MR. VASA SESHAGIRI RAO, MEMBER (TECHNICAL) HON'BLE MR. AJAYAN T.V. MEMBER (JUDICIAL) FINAL ORDER No.40049/2025 DATE OF HEARING: 12.12.2024 DATE OF DECISION:08.01.2025 Per AJAYAN T.V.
The appellant has preferred this appeal being aggrieved by the impugned order in original by which the adjudicating authority has confirmed the demand of Rs.50,14,546/- towards CENVAT Credit on various ínput services erroneously taken during February 2013 and march 2013 under Rule 14 of Cenvat Credit Rules 2004 (CCR in short) read with Section 11A(1) of the Central Excise Act, 1944 (Act in short). The adjudicating authority had also confirmed the interest chargeable at the appropriate rates and imposed a penalty of Rupees Five lakhs in terms of Rule 15(1) of the CCR.2
2. Brief facts are that the appellant is a manufacturer of Methyl Ethyl Ketone (MEK) and Secondary Butyl Alcohol (SBA), and had availed CENVAT credit of duty paid on inputs/capital goods and service tax paid on various services under the CCR. During the course of scrutiny of E.R. 1 Returns filed by the appellant for the months of February 2013 and March 2013, it was noticed that the appellant had availed and utilized CENVAT credit paid on various input services. The appellant were asked to submit invoices and other related documents to prove that the said services were used by them in the manufacture of final products. However as they did not furnish any details/reasons, a show cause notice (SCN in short) was issued alleging that on scrutiny of nature of services consumed, it appeared that they were not eligible to avail CENVAT credit of such service tax paid in as much as the said services were not covered within the scope of input service as defined under Rule 2(l) of the CCR and also for the reason that they have not been used in or in relation to the manufacture of the finished excisable goods as required under the provisions of Rule 3 of CCR and for other reasons as tabulated in para 4 of the SCN. Purusant to the reply filed by the appellant, they were granted a personal hearing, post which the impugned order in original was passed confirming the demand and interest and imposing penalty as stated supra.
3. The Ld. Counsel Shri. V. Ravindran appeared and argued for the appellant. He would submit that the Respondent had traversed beyond the notice, which is bereft of any reasoning for the ineligibility of cenvat credit proposed to be recovered and, on this score alone, the impugned 3 order is not maintainable in law. On merits he submitted that of the 15 services on which input service tax credit was taken, the benefit of cenvat credit in respect of three services were allowed by the Adjudicating Authority in the impugned order in original. He submitted that in respect of rent a cab service, the appellant had not raised any specific plea in its reply or in the write up of its technical director explaining how they were entitled to the credit of the said services. He further submits that they had reversed the credit taken on rent a cab services duly intimating the same in their reply to show cause notice dated 09-03-2015 and in their written submissions dated 07-04-2016 and have not relied on any case law in respect of rent a cab service, while submitting case laws in respect of entitlement to credit taken of service tax paid on other services, and therefore are not contesting the same. He further submits that as regards the remaining 11 services, their actual use has been elaborated by the Appellant's Technical Director, during the course of the adjudication proceedings and the same is available as part of the records at Page 52- 53 of the appeal paper book. It is further submitted that all these services in dispute in the present appeal are in or in relation to the manufacture or clearance of final products as per the Technical Director's write up, and are also held as falling within the scope of the Rule 2 (l) of CCR by the Courts/Tribunals, over the years and the admissibility of Cenvat Credit taken on these input services are no more res integra as per the case laws relied on. It is therefore submitted that the denial of credit on these services is not just, not legal and not proper and therefore the impugned order in original may be set aside and the appeal allowed with consequential relief.
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4. To bolster his submissions, the learned counsel for the appellant relied on the following case laws:
Name of Input Case law citation Gist of decision Service COMMERCIAL 2014 (34) S.T.R. 276 Cenvat credit of Service Tax -
(TRI. - DEL.) Input service - Construction OR INDUSTRIAL HI TECH POWER & services - Coal shed for storage - CONSTRUCTION Eligible for credit of Service Tax as STEEL LTD.
SERVICE VERSUS shed constructed for storage of coal
COMMISSIONER required for manufacture of
OF CENTRAL finished goods - Covered by
EXCISE, RAIPUR definition of 'Input service' - Rules
2 and 3 of Cenvat Credit Rules,
2004. [paras 3, 4]
Construction 2017(7)GSTL (346) Cenvat credit of Service Tax -
(Tri.Mum) Input services - Construction of
Service
Raymond UCO scrap yard, barbed wire fencing,
canteen hall and dining hall,
Denim Pvt. Ltd. Vs. security services at guest house -
CCE, Nagpur Credit admissible - Rule 2(l) of
Cenvat Credit Rules, 2002. [para
5]
BUSINESS COMMISSIONER V. Cenvat credit of Service tax - Input
LANCO service - Credit of Service tax on
AUXILIARY
INDUSTRIES LTD. - agent's commission, GTA,
SERVICE 2015 (38) S.T.R. J365 advertising, clearing and
(A.P.)] forwarding, telephone, internet
ALSO CONFIRMED and courier charges - Any input
IN service used by manufacturer
2012 (28) STR J19 whether directly or indirectly in or
(BOMBAY HIGH in relation to manufacture and
COURT) clearance from place of removal
covered by definition and eligible
for credit - Showroom is place of
removal as final product cleared to
own showrooms and no sale at
factory gate - Services used till
place of removal eligible for credit -
Cenvat credit of Service tax paid
on impugned services eligible as
credit - Credit not admissible on
services directly or wholly
5
attributable to trading activities -
Issue involving interpretation and
penalty not imposable - Interest
payable on credit held as not
admissible - Sections 11A, 11AB
and 11AC of Central Excise Act,
1944 - Rules 2(l), 14 and 15 of
Cenvat Credit Rules, 2004. [paras
2, 6, 7, 8, 9]
2014 (36) S.T.R. 994 Cenvat credit of Service Tax -
(GUJ.) Cargo Handling Services - Service CENTRAL EXCISE Tax thereon, allowed to VERSUS manufacturer as 'input service tax INDUCTOTHERM credit' - Challenge to, on the INDIA P. LTD. ground that Service Tax paid for handling cargo is for clearance of the product beyond the place of removal, such that amount paid as Service Tax cannot be included in the definition of input service - Ground rejected - Cargo handling service is rendered on clearance of final product from the port for the purpose of export and any service availed by exporters until goods CARGO left India from the port are services HANDLING used in relation to clearance of final products up to place of SERVICE removal - Though there is no express inclusion of such service in definition of 'input service' in Rule 2(l) of Cenvat Credit Rules, 2004, it can be included therein holding that in case of export of final product, place of removal would be port of shipment and not factory gate and therefore, the manufacturer would be entitled to avail the amount claimed towards cargo handling as 'input service' under the Cenvat Credit Rules, 2004, as definition of 'input service' is very wide - Rule 2(l) ibid
- Sections 4(3)(c) and 35G of Central Excise Act, 1944 as 6 applicable to Service Tax vide Section 83 of Finance Act, 1994.
[paras 10, 22, 23] 2014 (35) S.T.R. 674 Cenvat credit - Input services - (GUJ.) Customs House Agent, Shipping COMMISSIONER Agents and Container Services - VERSUS Used for export of finished goods DYNAMIC by manufacturer thereof - HELD : INDUSTRIES LTD. Where exports are on FOB basis, place of removal is port and not factory gate - Impugned services were utilised for purpose of export of final products and exporters could not do business without them - Hence, Service Tax paid on these services availed till goods reached port, was admissible -
Input service cannot be given restrictive meaning in view of "means.... and includes" used in definition in Rule 2(l) of Cenvat Credit Rules, 2004. [paras 6, 7, 8, 10] CLEANING 2014 (36) S.T.R. 1089 Cenvat credit of Service Tax -
(TRI. - DEL.) Input service - Cleaning service - SERVICE DELPHI Credit admissible - Rule 2(l) of AUTOMOTIVE Cenvat Credit Rules, 2004. [para SYSTEM P. LTD. 3] VS COMMR. OF CUS., C.E. & S.T., NOIDA CONSULTING 2015 (40) S.T.R. 509 Cenvat credit of Service Tax -
(TRI. - Bangalore) Input service credit - Consulting ENGINEERING KAKINADA Engineer service - Assessee SERVICE SEAPORTS LTD. engaged in providing port services Versus - Denial of amount of credit on C.C.E., S.T. & CUS., ground that service provider not VISAKHAPATNAM- liable to pay Service Tax in view of II exemption Notification No. 38/2010-S.T. - HELD : Settled law that whether service liable to tax or not or eligible for exemption cannot be determined by receiver of service - Whether receiver of 7 service received service; utilized service for providing output service; maintained proper records and documents in accordance with law and paid tax, ought to be examined - Denial cannot be sustained - Rule 2(l) of Cenvat Credit Rules, 2004. [paras 9, 9.1, 9.2, 9.3] 2017(48) STR 261 Cenvat credit - Input services - (Tri.Chennai) Consulting engineer service Enmas Andritz Pvt. provider to buyer of recovery boiler Ltd. Vs CST, Chennai - Using various services in relation II to installation of boiler as well as designing thereof to ensure that boiler is manufactured according to design to meet to need of buyers
- Inputs services essential to provide output service of consulting engineer - Assessee entitled to credit of duty paid on such services - Rules 2(l) and 3 of Cenvat Credit Rules, 2004. [para 4] 2015 (39) S.T.R. 309 Cenvat credit of Service Tax - (TRI. - DEL.) Input credit - Courier service - COMMISSIONER Eligibility - Services availed for OF CENTRAL dispatch of cheques for payments, EXCISE, DELHI-III invoices, purchase orders - Being VERSUS integral part of business, appellant MINDARIKA PVT. entitled to take credit - Rule 3 of LTD Cenvat Credit Rules, 2004. [paras 5, 6] COURIER 2013 (32) S.T.R. 433 Cenvat credit - Input service -
SERVICE
(TRI. - AHMD.) Courier service - Service Tax paid
HINDALCO on courier service admissible for
INDUSTRIES LTD. Cenvat credit since used for
VERSUS sending document to their head
COMMISSIONER office and customers and definitely
OF CENTRAL relatable to manufacture - Rule 3 of
EXCISE, VAPI Cenvat Credit Rules, 2004. [2012 (28) S.T.R. 111 (Tri.-Ahmd.) and Tax Appeal No. 433/2010 followed]. [para 2] 8 DESIGNING 2016 (41) S.T.R. 833 Cenvat credit of Service Tax -
(TRI. - Mum.) Input service - Service Tax paid SERVICE Maharastra Cricket under reverse charge mechanism on architect's services and design Association Vs CCE, services - Cenvat credit availed as Pune III against output service of appellant i.e. renting of immovable property
- Input service not limited to services for providing output service, but also includes service for setting up premises of provider of output service - Services used for setting up stadium are input services squarely covered by definition of input service - C.B.E. & C. Circular No. 98/01/2008- S.T., dated 4-1-2008 travelled absolutely contrary to clear and plain language of definition of input service - Appellant entitled for Cenvat credit - Demand not sustainable - Sections 73 and 75 of Finance Act, 1994. - It is very pertinent that legislators knowing fully that there is no tax or excise duty on constructing premises of output service provider, included services used for setting up of premises of provider of output service, for the simple reason that if the premises are used for providing output service, the credit of input services used for setting up the premises of service provider must be allowed. [paras 8, 9, 10] ERECTION, 2009 (14) S.T.R. 305 Input service - Erection, Commissioning and Installation COMMISSIONING (TRI. - AHMD.) COMMR. OF C. EX., services received at premises of / INSTALLATION buyer of machines manufactured VAPI SERVICES VERSUS by assessee - Erection and ALIDHARA commissioning cost included in TEXTOOL transaction value of machine -
ENGINEERS PVT. Process undertaken at buyer's LTD. premises incidental to manufacturing activity undertaken in manufacturer's premises as what is sold is 9 complete machine duly erected and commissioned and operational -
Rule 2(l) of Cenvat Credit Rules, 2004 not requires service to be rendered at factory of manufacturer - Service not post removal/post manufacturing as whole transaction of manufacture, erection and commissioning and supply treated as one - Service provided to assessee as sub-
contractor and not to buyer of machine - Credit eligible -
Department's appeal for penalty rejected.
2015 (39) S.T.R. 85 Cenvat credit of service tax - Input (TRI. - DEL.) credit - Manpower recruitment BAJAJ MOTORS service - Non-mention of correct LTD. service in invoice - Eligibility -
VERSUS Credit not deniable on the ground COMMISSIONER that name of service mentioned in OF CENTRAL invoice was 'Manpower EXCISE, DELHI-III Recruitment Agency' instead of 'Manpower Recruitment service' -
Rule 3 of Cenvat Credit Rules, MANPOWER 2004. [para 6] REQUIREMENT 2018(10)GSTL 550 Cenvat credit - Input service - OR SUPPLY Manpower service in nature of (Tri. Mumbai) SERVICES Pudumjee Pulp & trainee, handling of gardening service - Mandatory to maintain a Paper Mills Ltd. Vs garden in factory for controlling CCE, Mum.II pollution as per Central Pollution Control Board's guidelines without complying which factory could not be run - Material Handling service - Without handling of material assessee cannot run its factory - Assessee entitled for input service credit -
Rules 2(l) and 3 of Cenvat Credit Rules, 2004. [para 4] 2015 (39) S.T.R. 145 Cenvat credit of Service Tax -
MANAGEMENT, (TRI. - AHMD.) Input credit - Repair and
MAINTENANCE NIRMA LIMITED Maintenance services - Service
VERSUS Tax paid for maintenance and
10
AND REPAIR COMMISSIONER repair of Xerox machine eligible for
OF C. EX. & S.T., Cenvat credit since activity is in
SERVICES
VADODARA relation to business of appellant -
Rule 3 of Cenvat Credit Rules,
2004. [para 4]
2015 (38) S.T.R. 587 Cenvat credit of Service Tax - (TRI. - BANG.) Input credit - Maintenance and CARGILL INDIA Repair service - Eligibility -
PVT. LTD. Services used in relation to
VERSUS maintenance and repair of factory -
COMMR. OF C. EX., Appellant entitled to credit - Rule
CUS. & S.T., 3 of Cenvat Credit Rules, 2004.
BANGALORE-I [para 4]
2013 (30) S.T.R. 572 Cenvat credit - Input service -
(TRI. - MUMBAI) Technical testing and analysis
SEMCO ELECTRIC service to check quality parameters
PVT. LTD. of exported goods - It is service
VERSUS without which export of goods
COMMISSIONER cannot take place - Hence, it is
OF CENTRAL input service on which assessee can
EXCISE, PUNE-I take credit of Service Tax paid -
Rule 2(l) of Cenvat Credit Rules,
2004. [para 5.5]
2010 (18) S.T.R. 56 Cenvat credit of Service tax - Input
(TRI. - DEL.) service - Cargo Handling service
TECHNICAL
COMMISSIONER and Technical Testing and
AND ANALYSIS OF CENTRAL Analysis service - Revenue
SERVICES EXCISE, RAIPUR contending that credit not
VERSUS admissible as services used beyond
H.E.G. LIMITED place of removal - Tribunal Larger
Bench in 2009 (15) S.T.R. 23
(Tribunal-LB) holding input
service not to be restrictively
interpreted to confine to factory or
depot - Non-inclusion of freight in
assessable value of goods not
alleged in show cause notice and
not raised before and such new
facts not admissible at appellate
stage - Impugned order extending
credit, sustainable - Rules 2(l), 14
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and 15 of Cenvat Credit Rules,
2004. [paras 2, 3, 5, 6, 7]
5. The Learned AR Shri. M. Selvakumar reiterates the rationale stated in the impugned order in original for denial of cenvat credit. He submitted that such denial of credit was just and proper and prays for dismissal of the appeal.
6. We have heard both sides and perused the records. The preliminary ground raised by the counsel for the Appellant, is that the notice is bereft of any reasoning for the ineligibility of cenvat credit proposed to be recovered and that therefore the Respondent had traversed beyond the notice. We notice that the Appellant was called upon by the jurisdictional range office to submit invoices and related documents to prove that the services were used in the manufacture of final products, post scrutiny of the ER 1 returns filed. The Appellant has contended that there is no legal requirement to file documents to confirm the nature of services for which credit of service tax was taken while furnishing their ER 1 returns. Rule 9(6) of the CCR, inter-alia, stipulates that the burden of proof regarding the admissibility of the cenvat credit shall lie upon the manufacturer taking such credit. Scrutiny of returns which the jurisdictional officer is mandated to do does not mean mere arithmetical scrutiny, and he is empowered and entitled to call for documents to satisfy himself as to the veracity and correctness of the declarations made in the return. When admittedly no documents that would evidence the nature of services and their use by the appellant directly or indirectly in or in relation to the manufacture of the final 12 products and clearances of final products upto the place of removal, were filed with the return as there is no stipulation to do so, and when the appellant has failed to respond to the request of the jurisdictional officer to submit invoices and related documents to evidence the aforesaid manner of use, issue of show cause notice clearly specifying Rule 2(l) of the CCR and drawing attention to the burden of proof regarding admissibility of the cenvat credit that lies upon the appellant and calling upon the appellant to submit all evidences upon which they intent to rely on as well as intimating that they will be heard in person if they require to do so prior to the matter being adjudicated, cannot in any way be faulted. The impugned order in original after following due process and adjudicating the show cause notice recording reasons upon consideration of the appellant's submission, cannot therefore be said to have gone beyond the notice on this count. The case laws of CCE, Bangalore Vs Brindavan Beverages Pvt. Ltd reported in 2007(213) ELT 487 (S.C.) and Rajasthan Spinning and Weaving Mills Ltd. Vs CCE [1989 (41) ELT 450 (Tribunal) relied on by the appellant are inapplicable in light of the factual circumstances and reasons given above. Hence the preliminary ground raised by the counsel for the Appellant, namely that the notice is bereft of any reasoning for the ineligibility of cenvat credit proposed to be recovered and that therefore the Respondent had traversed beyond the notice, is without any substance and is thus rejected.
7. In order to appreciate the issue, it is necessary to examine the definition of input service as it existed in the CCR during the relevant 13 period that is February 2013 and March 2013. The definition of "input service" in Rule 2(l) of the CCR came to be substituted by the Cenvat Credit First Amendment Rules, 2011 notified vide notification No.3/2011 C.E.(NT) dated 01.03.2011 with effect from 01.04.2011 and stood further amended vide Notification No.28/2012 C.E.(NT) dated 20-6-2012 with effect from 01-07-2012.
8. What constitutes 'input service' stood defined during the relevant period under Rule 2(l) as under: -
"Input Service" means any service, -
(i) used by a provider of output service for providing an output service; or
(ii) used by a manufacturer, whether directly or indirectly, in or in relation to the manufacture of final products and clearance of final products upto the place of removal, and includes services used in relation to modernization, renovation or repairs of a factory, premises of provider of output service or an office relating to such factory or premises, advertisement or sales promotion, market research, storage upto the place of removal, procurement of inputs, accounting, auditing, financing, recruitment and quality control, coaching and training, computer networking, credit rating, share registry, security, business exhibition, legal services, inward transportation of inputs or capital goods and outward transportation upto the place of removal;
but excludes, 14 (A) service portion in the execution of a works contract and construction services including service listed under clause (b) of Section 66E of the Finance Act (hereinafter referred as specified services) in so far as they are used for-
(a) construction or execution of works contract of a building or a civil structure or a part thereof; or
(b) laying of foundation or making of structures for support of capital goods, except for the provision of one or more of the specified services; or (B) services provided by way of renting of a motor vehicle, in so far as they relate to a motor vehicle which is not a capital goods; or (BA) service of general insurance business, servicing, repair and maintenance, in so far as they relate to a motor vehicle which is not a capital goods, except when used by-
(a) a manufacturer of a motor vehicle in respect of a motor vehicle manufactured by such a person; or
(b) an insurance company in respect of a motor vehicle insured or reinsured by such a person; or (C) such as those provided in relation to outdoor catering, beauty treatment, health services, cosmetic and plastic surgery, membership of a club, health and fitness centre, life insurance, health insurance and travel benefits extended to employees on 15 vacation such as Leave or Home Travel Concession, when such services are used primarily for personal use or consumption of any employee.
9. On an analysis of the above definition, it is seen that the same is broadly in three parts; First part, which is the main part, covers input services used for providing output service or used by manufacturer, directly or indirectly, in relation to manufacture or clearance of final product upto the place of removal; Second part is the inclusive part of the definition which expands the scope beyond the coverage of the first part, the word 'includes' enlarging the scope, without being exhaustive or restrictive, and the Third part covers specific exclusions. The exclusions listed in sub-clause (A), sub-clause (B) and sub-clause (BA) have their exceptions; the service portion in the execution of a works contract and construction services including specified services in sub-clause (A) being permissible when they are used for provision of one or more of the specified services, that is, service listed under clause (b) of Section 66E of the Finance Act, namely the declared services of construction of a complex, building, civil structure or a part thereof, including a complex or building intended for sale to a buyer, wholly or partly, except where the entire consideration is received after issuance of completion certificate by the competent authority. The services listed in sub-clause (B) is so far as they relate to motor vehicle are permissible when they are being provided in cases when the credit on the motor vehicle is available as capital goods. The service of general insurance business, servicing, repair and maintenance, in so far as they relate to a 16 motor vehicle which is not a capital goods, is available when used by a manufacturer of a motor vehicle in respect of a motor vehicle manufactured by such a person; or an insurance company in respect of a motor vehicle insured or reinsured by such a person. However, the exclusions in sub-clause (C) are only when such services are used primarily for personal use or consumption of any employee.
10. As regards the first part/main part of the definition, it is pertinent to note the difference in the language employed by the legislature. With respect to output service, it is provided that the input service should be used for providing the output service. The specific reference to taxable service has been removed and it is provided that with respect to output service, the input service should be used for providing the output service. The rationale appears to be that the charging section 66B brought in by Finance Act 2012 now specifies that service tax at the rate specified therein would be levied on the value of all services, other than those services specified in the negative list, provided or agreed to be provided in the taxable territory by one person to another and for the first time in Section 65B titled 'Interpretations', a definition of "service" was also provided in Section 65B(44), which interalia stipulates that service means any activity carried out by a person for another for consideration, and includes a declared service. Section 65 of the Finance Act 1994 also ceased to apply with effect from 01-07-2012 vide Notification No.12/2012-ST dated 05.06.2012. However, for manufacture of the final product, it continues to be stipulated in Rule 2(l) that the input service be used either directly or indirectly, in or in 17 relation to the manufacture of the final product. On a plain reading of the same it is evident that in order for a service to qualify as an input service vis a vis an output service provider, it has to be shown that the said service is used for providing the output service, while in the case of a manufacturer, it would suffice to show that the same is used in relation to the manufacture of the final product. The expression 'used for' is relatively narrow in its scope when compared to the expression 'in relation to', which is far wider.
11. To understand the Second part/inclusive part of the definition, it would also be beneficial to advert to the decision of the Honourable Supreme Court in the case of Ramala Sahkari Chini Mills ltd v. Commissioner of C. Ex, Meerut-I, reported in 2010 (260) E.L.T. 321 (S.C.) , where the Honourable Apex Court has interpreted the term "include" and has held as follows:
" it is trite that generally the word "include" should be given a wide interpretation as by employing the said word, the legislature intends to bring in, by legal fiction, something within the accepted connotation of the substantive part.
(Also see: C.I.T., Andhra Pradesh v. M/s. Taj Mahal Hotel, Secunderabad - (1971) 3 SCC 550, Indian Drugs & Pharmaceuticals Ltd. & Ors. v. Employees' State Insurance Corporation & Ors. - (1997) 9 SCC 71, T.N. Kalyana Mandapam Assn. v. Union of India & Ors. - (2004) 5 SCC 632 = 2004 (167) E.L.T. 3 (S.C.) = 2006 (3) S.T.R. 260 (S.C.), It is also well settled that in order to determine whether the 18 word "includes" has that enlarging effect, regard must be had to the context in which the said word appears. (See:
The South Gujarat Roofing Tiles Manufacturers Association & Anr. v. The State of Gujarat & Anr. - (1976) 4 SCC 601, R.D. Goyal & Anr. v. Reliance Industries Ltd. - (2003) 1 SCC 81, and Philips Medical Systems (Cleveland) Inc. v. Indian MRI Diagnostic and Research Limited & Anr. - (2008) 10 SCC
227."
12. A similar view is forthcoming in the decision in Commercial Taxation Officer, Udaipur v. Rajasthan Tax Chem Ltd, 2007 (209) E.L.T. 165 (S.C.), wherein the Apex Court has laid down as follows:
" The word includes gives a wider meaning to the words or phrases in the Statute. The word includes is usually used in the interpretation clause in order to enlarge the meaning of the words in the Statute. When the word include is used in the words or phrases, it must be construed as comprehending not only such things as they signify according to their nature and impact but also those things which the interpretation clause declares they shall include."
13. It is settled law that the expression "in relation to", used in the said rule, has to be given a wide connotation as has been held by the Apex Court in Collector of Central Excise v. Solaris Chemtech Limited, 2007(214) ELT 481 (SC) and Doypack Systems (Pvt) Ltd v. Union of India, 1988(36) ELT 201 (SC).
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14. A constitution bench of the Honourable Supreme court, in State of Karnataka v. Azad Coach Builders Pvt Ltd, 2010(262)ELT 32 (SC), has held thus:
"The expression 'in relation to' are words of comprehensiveness, which might both have a direct significance as well as an indirect significance, depending on the context in which it is used and they are not words of restrictive content and ought not be so construed."
15. In the inclusive portion of the definition, the legislature has omitted the words/phrases, "setting up", "activities relating to business, such as"
thereby confining the services allowable to those specified in the inclusive part. Therefore, by virtue of this omission and in view of the first part allowing the manufacturer the leeway of treating services used, whether directly or indirectly, in or in relation to the manufacture of final products and clearance of final products upto the place of removal, as input services, apart from the services listed in the inclusive part, only those services having nexus or integral connection with the manufacture of final products would qualify as input service for the appellant.
16. However, given that the legislature has categorically provided for certain services when used for specified activities to be excluded from the definition of 'input services', such specific exclusions, subject to the stipulated exceptions, will always remain out of the purview of the said definition. That is to say, the exclusions stipulated by legislature, subject to the exceptions stated therein, are only from what is otherwise 20 includable in the first part and second part, that is the main part and inclusive part as elucidated supra. In other words, once the legislature has made its intent known by mandating as to what is excluded from the definition of input services, then it shuts the avenue for any contention that such services when used for the specified activities would otherwise qualify as input services since they fall under the main part or inclusive part, and that therefore the availment of credit on these services are licit.
17. Therefore, it is imperative to individually examine the various services so received and utilised and apply the said test whether they have a nexus or integral connection to the manufacture of the final products and to arrive at a conclusion as to which of the services so provided would qualify as input services subject of course to the overriding factum of such services not figuring in the stipulated exclusions, which would then straightaway take such services out of the ambit of the definition of input services on which credit can be licitly taken.
18. To understand the nature of the exclusions in sub-clause A of the definition to input service in 2(l) of CCR, it requires an examination of the meaning of "works contract" used therein. It is seen that Rule 2(t) of CCR stipulates that the words and expressions used in these rules and not defined but defined in the Excise Act or the Finance Act shall have the meanings respectively assigned to them in those Acts. Finance Act 2012 has in Section 65B(54) defined "works contract" as "works contract" means a contract wherein transfer of property in goods 21 involved in the execution of such contract is leviable to tax as sale of goods and such contract is for the purpose of carrying out construction, erection, commissioning, installation, completion, fitting out, repair, maintenance, renovation, alteration of any movable or immovable property or for carrying out any other similar activity or a part thereof in relation to such property.
19. At this juncture, it is pertinent to note that prior to the substitution of sub-clause A of the exclusions to the input services in Rule 2(l) in the aforementioned form as reproduced supra, which substitution was made vide. notification No.28/2012-CE(N.T) dated 20-06-2012 w.e.f 01-07- 2012, sub-clause A provided for excluding specified services, namely, services specified in sub-clauses (p)-Service provided by an architect in his professional capacity, in any manner, (zn)- service provided by any other person in relation to port services in a port, in any manner, (zzl)- service provided by a technical inspection and certification agency, in relation to technical inspection and certification, (zzm)- service provided by airports authority or by any other person in any airport or a civil enclave, (zzq)- service provided by any other person in relation to commercial or industrial construction, (zzzh)- service provided by any other person in relation to construction of complex and (zzzza)- service provided by any other person in relation to the execution of a works contract, excluding works contract in respect of roads, airports, railways, transport terminals, bridges, tunnels and dams, of clause (105) of Section 65 of the Finance Act (hereinafter referred as specified services), in so far as they are used for-
22
(a) construction of a building or a civil structure or a part thereof; or
(b) laying of foundation or making of structures for support of capital goods, except for the provision of one or more of the specified services;
20. There was also an explanation to sub-clause (zzzza) of clause (105) of Section 65 of the Finance Act, 1994 which is as below:
Explanation. - For the purposes of this sub-clause, "works contract"
means a contract wherein, -
(i) transfer of property in goods involved in the execution of such contract is leviable to tax as sale of goods, and
(ii) Such contract is for the purposes of carrying out, -
(a) erection, commissioning or installation of plant, machinery, equipment or structures, whether pre-fabricated or otherwise, installation of electrical and electronic devices, plumbing, drain laying or other installations for transport of fluids, heating, ventilation or air-conditioning including related pipe work, duct work and sheet metal work, thermal insulation, sound insulation, fire proofing or water proofing, lift and escalator, fire escape staircases or elevators; or
(b) construction of a new building or civil structure or a part thereof, or of a pipeline or conduit, primarily for the purpose of commerce or industry; or
(c) construction of a new residential complex or a part thereof;
or 23
(d) completion and finishing services, repair, alteration, renovation or restoration of, or similar services, in relation to
(b) and (c); or
(e) turnkey projects including engineering, procurement and construction or commissioning (EPC) projects;
21. Thus, when the input services definition under Rule 2(l), excluded specified services, including works contract in so far as they are used for
(a) construction of a building or a civil structure or a part thereof; or (b) laying of foundation or making of structures for support of capital goods, the works contract definition per se, as provided in the explanation to sub-clause (zzzza) of clause (105) of Section 65 of the Finance Act, 1994, clearly identified construction of a new building or civil structure or a part thereof as a separate purpose for which a works contract can be executed, distinct and different from works contract for the purposes of carrying out erection, commissioning or installation of plant, machinery, equipment or structures, whether pre-fabricated or otherwise or works contract for the purposes of turnkey projects including engineering, procurement and construction or commissioning (EPC) projects etc;.
22. Given the above nature of exclusion specified in sub-clause (A) , it would appear that the omission of the words "setting up" in the inclusive part of the definition of input services is only by way of abundant caution to avoid any interpretational incongruity since the exclusion is of specified services, including works contract in so far as they are used for
(a) construction of a building or a civil structure or a part thereof; or (b) laying of foundation or making of structures for support of capital goods, 24 which services are bound to be used in the course of setting up of a factory.
23. That is to say, in so far as the services of works contract as defined in sub-clause (zzzza) of clause (105) of Section 65 of Finance Act ibid was concerned, it was only service provided by any other person in relation to the execution of a works contract, in so far as they are used for construction of a building or a civil structure or a part thereof or laying of foundation or making of structures for support of capital goods, which remained excluded. In other words, for the period prior to 01.07.2012, if service provided by any other person in relation to the execution of a works contract are used for other than the excluded purposes and have a nexus or integral connection with the manufacture of final products, then the manufacturer would be entitled to take cenvat credit of service tax paid on such services.
24. No doubt, Section 65 of the Finance Act 1994 has ceased to apply with effect from 01-07-2012 vide Notification No.12/2012-ST dated 05.06.2012 and a new definition of works contract under Section 65B(54) has also been introduced, however even in the absence of definition of different types of services as provided in Section 65 and even as per the new definition of works contract, the distinction of the works contract for different purposes drawn in the definition of works contract earlier, when the exclusion of specified services in so far as they are used for construction of a building or a civil structure or a part thereof or laying of foundation or making of structures for support of capital goods was 25 already stipulated in sub-clause A, can be considered to be of continued relevance.
25. It is emphasized that for the period after 01-07-2012, the service portion in the execution of a works contract and construction services, are so excluded only in so far as they are used for construction or execution of a works contract of a building or a civil structure or a part thereof; or laying of foundation or making of structures for support of capital goods; and if the service portion in the execution of a works contract and construction services, for the period after 01.07.2012, is used for other than the excluded purposes, and have a nexus or integral connection with the manufacture of final products, then the manufacturer would be entitled to take cenvat credit of service tax paid on such services.
26. On a perusal of the case laws relied upon by the learned counsel for the appellant, it is seen that none of the cases pertain to the same period as that of the present dispute. It is also seen that the definition of input services as prevalent for the relevant period of February 2013 and March 2013 involved in the present dispute, noting these substitutions, and amendments as well as the exclusions stated in the definition of 'input services', have not come up for discussion in these cases relied upon by the appellant, and hence they are of little aid to the appellant nor of much assistance to us in deciding the present dispute.
27. In light of the aforesaid position in law, we proceed to examine the correctness of the denial of cenvat credit by the adjudicating authority in the impugned order in original in the appellant's fact situation, for which 26 purpose, the reasons for denial as per the impugned order, juxtaposed with the contentions of the appellant in appeal, is tabulated as under.
Description of Amount Reason for Contention of the
input services of Cenvat denial as per Appellant as reflected in
for which credit denied Impugned the technical write up
was denied. (Rs) order and reply to SCN
4,50,882 Excluded from the It is related to the
purview of the maintenance and
1. Commercial or definition of input modification for the plant
Industrial services. [Para and machinery and storage
Construction 11(iv)] tanks, and such availment is
services inevitable as the products
manufactured are highly
inflammable
Skilled repair and
maintenance services are
Not consumed for required to be engaged for the
2. Management,
the upkeep of plant specialized equipment and Maintenance or 3,99,466 and machinery. machinery such as Repair service [Para 11(v)] mechanical seals which cannot be carried out by in house staff Services used in or Design services used for in relation to designing fabrications, plant setting up of the layout, design layout for the power plant that expansion project and for had no nexus with certain maintenance related manufacture of work
3. Designing excisable goods, 9,270 Services but rather had nexus with generation of power, a non-
taxable commodity. [Para 11(vi)] Even though Technical advise provided by inclusive part of consultants for setting up of the definition of the power plant input service
4. Consulting covered in its 1,25,616 Engineer Service ambit 'renovation or repairs of factory', this is under exclusive part of the 27 definition and hence not eligible.
[Para 11(vii)]
These are used for Erection commissioning and
expansion of installation pertains to
factory that is installation of new
fabrication and plant/equipments/machinery
erection and
5. Erection, commissioning of
Commissioning their SBA and
1,40,445
and Installation MEK plants and
service coming under
exclusion clause
and hence do not
qualify as input
services. [Para
11(viii)]
Used for making market
enquiry for raw material
purchase/final product sale
These are used in to obtain unbiased market
relation to export information in demand and
of goods and in supply situation for similar
relation to sale of products which helps in
goods. These relate making informed decision on
6. Business
25,05,021 to commission market positioning of the
Auxiliary Service
paid to sales products, marketing schemes
agents. Hence not and patterns to be adopted
eligible for cenvat (customer requirements),
credit. [Para sale of manufactured goods
11(ix)] to identified customers,
planning production
schedule based on demands
etc
Employed for receiving the
This is used in
raw materials and chemicals
relation to export
used in production, to
of goods, thus
dispatch finished goods to
related to post
export customers thereby
7. Cargo manufacturing
51,912 involving actual
Handling service and after clearance
transportation of inputs into
of goods from the
the factory and actual
factory, hence no
transportation of finished
credit allowable.
goods upto the place of
[Para 11(x)]
delivery/exportation
8. Cleaning As these are for Being an industry of
13,127
Services upkeep of factory petroleum products
28
premises and its governed by strict pollution
surroundings and control norms besides
may have been product norms. The
used consequent manufacturing area has to be
to statutory kept clean from the point of
requirement of safety and the service also
pollution control involves cleaning production
board, factory's equipments, keeping fire and
Act etc, credit not safety devices clean etc is a allowable, yet are regulatory requirement and not directly or hence an integral part of indirectly manufacturing operations connected with manufacture of goods. [Para 11(xi)] These services provide the necessary technically skilled manpower that is needed to support the regular production and maintenance Manpower supply employees for the included supply of manufacturing operations labour for upkeep and is an ongoing activity as of gardening and there are many attrition their engagement cases and replacement skilled in maintenance or manpower is continually
9. Man power repair service required. The men supplied recruitment or 12,42,825 involving were not engaged in the supply service construction of activity of civil work or civil structure or gardening or grass cutting part thereof, these but the men so supplied are excluded from being skilled/semi skilled "input services". manpower are used for [Para 11(xii)] processing/production of final products in critical plants such as chemical plant and directly aid the manufacturing process in the plant Used for business Used for communication of in general and purchase orders, order cannot be linked to confirmation, production
10. Courier the manufacture schedule, delivery of 4,070 Service of excisable goods. agreements, procedure and Not qualifying for other correspondence with credit. [Para client and customers in 11(xiii)] connection with the raw 29 materials purchased/to be purchased or final products sold/to be sold and is not used for transportation of any of our final products from the place of removal to the place of delivery Used for No particular contention transportation of expressing the rationale for employees, which the availment of such service
11. Rent-a-cab has no nexus to or case law is relied upon and 69,285 service manufacture and the credit has been reversed hence not eligible and is not contested for credit. [Para 11(xiv)] These are statutory third party analytical services that a hazardous industry must get done for legal compliance. The thermic used for expansion fluid used needs to be of factory and analysed by a third party
12. Technical setting up for analytical facility that is Testing and 2,627 power plant and approved by Factory Analysis service therefore the credit Inspectorate on a periodical is not allowed.
basis and there are also [Para 11(xv)] environmental analysis that are carried out by tamilnadu pollution control board on a periodical manner which are mandatory Total 50,14,546/-
28. On a perusal of the records, and documents annexed to the written submissions dated 07.04.2016, we find that in the Appellant's case, from the purchase orders pertaining to Erection Installation & Commissioning, Construction Service and Consulting Engineer, Design Services and Technical & Analytical Services produced by the Appellant that they involve works contract of erection, commissioning or installation of plant, machinery, equipment and structures relating thereto, pertain to the 30 Appellant's MEK expansion plant, SBA plant and Cogen Biomass Power plant. These are distinct and different from works contract and construction services used for construction or execution of works contract of a building or a civil structure or a part thereof or laying of foundation or making of structures for support of capital goods, which fall under the specific exclusion under sub-clause A of the exclusions listed in the definition of 'input service', as elucidated supra. Further, these are services having nexus or integral connection with the manufacture of final products of the Appellant, namely Methyl Ethyl Ketone (MEK) and Secondary Butyl Alcohol (SBA). We are therefore of the view that the denial of cenvat credit by the Adjudicating Authority in respect of Sl.No.1,3,4,5 and 12 of the table in the previous paragraph, namely, commercial or industrial constructions services, designing services, consulting engineer service, Erection, Commissioning and Installation service respectively, is incorrect and accordingly set aside findings of the Adjudicating Authority in this regard.
29. Further, we find that the denial of credit by the Adjudicating Authority in respect of Sl.No.2, 6,7,8,9 and 10, namely, Management, Maintenance or Repair service, Business Auxiliary Service, Cargo Handling service, Cleaning Services, Man power recruitment or supply service and Courier Service, is also incorrect and accordingly set aside these findings for the reasons elaborated infra.
30. We find that in the appellant's case the services of Management, Maintenance or Repair service has been denied by the adjudicating 31 authority by a mere ipse dixit that it was not consumed for the upkeep of plant and machinery. The Adjudicating Authority has not controverted the appellant's contention that these service providers were engaged for the specialized equipment and machinery such as mechanical seals which cannot be carried out by in house staff. The purchase orders relating to calibration of tanks submitted by the appellant validates their contention. Likewise, the Adjudicating Authority has not given any reason for non- acceptance of the Appellant's contention that the Business Auxiliary Services for which they had submitted invoices, pertain to services used for making market enquiry for raw material purchase/final product sale, to obtain unbiased market information in demand and supply situation for similar products that helps in making informed decision on market positioning of the products, marketing schemes and patterns to be adopted (customer requirements), sale of manufactured goods to identified customers, planning production schedule based on demands etc which ex facie are services used directly or indirectly in or in relation to the manufacture of the final products. Moreover, the inclusion of an explanation in Rule 2(l) after sub-clause (C) vide notification 2/2016-CE (NT) dated 03.02.2016 that "for the purpose of this clause, sales promotion includes services by way of sale of dutiable goods on commission basis strengthens the appellant's contention that it is an activity of sales promotion. This explanation has been held to have retrospective effect vide Essar Steel India Ltd v CCE, 2016(4) TMI 332 Cestat Ahmedabad. Such denial sans any evidence to the contrary is unsustainable. We also find that the services of Cargo Handling service have been denied by the Adjudicating Authority by stating that they have 32 been used for export of goods after clearance from the factory whereas the Appellant has contended that the services were used for receiving the raw materials and chemicals used in production, to dispatch finished goods to export customers thereby involving actual transportation of inputs into the factory and actual transportation of finished goods upto the place of delivery/exportation. In as much as these services were used during the period February 2013 and March 2013 prior to the definition of place of removal being included in CCR, by virtue of Rule 2(qa) of CCR vide notification No.21/2014-CE dated 11.07.2014, which came into effect only from 11.07.2014, the appellant cannot be faulted for treating the same as input services when they have a clear nexus with the manufacture of the final product given their aforementioned uses by the appellant. In any event, prior to the inclusion of this definition of place of removal, in a catena of decisions judicial forums have taken a view that in case of exports, the place of removal is port of export where export documents are presented, Central excise v Inductotherm India P Ltd, 2014 (36) STR 994 (Guj) refers, being one such decision. Therefore, the denial of cenvat credit on cargo services by the adjudicating authority is untenable. We are unable to concur with the Adjudicating Authority's finding that cleaning services do not have any nexus directly or indirectly with the manufacture of the appellant's goods, despite finding that such services were possibly pursuant to statutory requirements. We find the Appellant's contention that being an industry of petroleum products governed by strict pollution control norms besides product norms which require the manufacturing area to be kept clean from the point of safety as well as quality, a viable reason having an integral nexus with the 33 manufacture of final products. Moreover, the service also involves cleaning production equipment, keeping fire and safety devices clean etc., as a regulatory requirement and hence the contention of the appellant that it is an integral part of manufacturing operations of their industry merits acceptance. We find that the adjudicating authority has erred in denying the availment of cenvat credit of man power recruitment or supply services availed by the appellant without controverting with positive evidence the appellant's contention that the men supplied were not engaged in the activity of civil work or gardening or grass cutting and on the contrary, the men so supplied being skilled/semi-skilled manpower are used for processing/production of final products in critical plants such as chemical plant and directly aid the manufacturing process. The appellant has further contended that such manpower services support the regular production and maintenance employees for the manufacturing operations and is an ongoing activity as there are many attrition cases and replacement skilled manpower is continually required in the plant. Such services being intangible and having been consumed and for which service tax has been paid and invoices produced, and when there is no evidence to the contrary relied on by the adjudicating authority to substantiate his findings, the same cannot be sustained. The appellant has stated that the courier service has been used for communication of purchase orders, order confirmation, production schedule, delivery of agreements, procedure and other correspondence with client and customers in connection with the raw materials purchased/to be purchased or final products sold/to be sold all of which indicate that there is a nexus between the said service indirectly in 34 relation to the manufacture of the final products. Further, the appellant has categorically averred that it has not used courier service for transportation of any of their final products from the place of removal to the place of delivery, which remains undisputed. We are of the view that the appellant in this case is therefore eligible to avail cenvat credit on the courier services availed. Therefore, we are of the view that in the appellant's case the services of Management, Maintenance or Repair service, Business Auxiliary Service, Cargo Handling service, Cleaning Services, Man power recruitment or supply service and Courier Service are used in or in relation to the manufacture of the final products for the reasons stated above and that therefore the appellant is entitled to cenvat credit of service tax taken on these services.
31. The denial of cenvat credit by the Adjudicating Authority in respect of Sl.No.11 of the table, namely rent a cab service, stands accepted and conceded by the Appellant and the amount is admittedly reversed and hence there is no contest in this regard.
32. The impugned order in original stands modified to the extent findings have been set aside as stated in the discussions above and for the reasons given supra. The appellant is liable to pay interest on the amount of cenvat credit disallowance that has been upheld, i.e., the amount of cenvat credit on rent a cab services reversed by the appellant, only if such ineligible cenvat credit taken has also been utilized by the appellant. In case such ineligible cenvat credit has not been taken and 35 utilised and if interest is not being paid, the appellant has to substantiate before the jurisdictional adjudicating authority the factum of such non- utilization of the ineligible cenvat credit by submitting a CA certificate in this regard which the adjudicating authority is free to verify. The penalty imposed by the adjudicating authority is set aside in view of our findings above and as such we do not find that the circumstances of this case warrant such imposition.
(Order pronounced in the open court on 08.01.2025) (AJAYAN T.V.) (VASA SESHAGIRI RAO) MEMBER (JUDICIAL) MEMBER (TECHNICAL) psd