Custom, Excise & Service Tax Tribunal
Sarda Energy And Minerals Ltd vs Commissioner, Central Excise & ... on 13 July, 2023
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL
NEW DELHI.
PRINCIPAL BENCH, COURT NO. IV
EXCISE APPEAL NO. 52181 OF 2022 (SM)
[Arising out of the Order-in-Appeal No. RPR-EXCUS-000-APP-031-22-23 dated
08/07/2022 passed by The Commissioner (Appeals), Central Excise Building,
Raipur - 492 001 (CG).]
M/s Sarda Energy and Minerals Ltd., Appellant
Industrial Growth Center, Siltara,
Raipur - 493 111 (CG).
VERSUS
Commissioner of Central Excise (Appeals), Respondent
Central Excise Building, Tikrapara, Raipur.
APPEARANCE Shri J.M. Sharma, Chartered Accountant and Ms. Pooja Agarwal, Chartered Accountant - for the appellant.
Shri Mahesh Bhardwaj, Authorized Representative for the Department. CORAM:HON'BLE DR. MS. RACHNA GUPTA, MEMBER (JUDICIAL) FINAL ORDER NO. 50897/2023 DATE OF HEARING : 27.04.2023.
DATE OF DECISION : 13.07.2023.
RACHNA GUPTA The appellant in the present case is the manufacturer of Sponge Iron, Billet, Wire Rod, Ferro Alloys, Fly ash Bricks etc. and was availing Cenvat credit on inputs/input services, capital goods in terms of Cenvat Credit Rules, 2004 hereinafter referred as CCR, 2004. During the audit of the appellant‟s record, Department observed that the appellant has availed Cenvat credit of service tax paid on construction services provided by 2 EX/52181 OF 2022 various contractors towards the construction of the civil structure or the part thereof for the appellants premises for making of structure of support of capital goods. Department alleged the said services as that of works contract service and thus formed an opinion that the service was ineligible for the availment of Cenvat credit under CCR, 2004. With this opinion show cause notice No. 4624 dated 03.09.2017 was served upon the appellant alleging that appellant has availed inadmissible Cenvat credit of Rs. 16,57,490/- for the period March 2015 to March 2017 on the works contract services. Accordingly, the proposal to recover the said Cenvat credit while disallowing the same and the recovery of interest alongwith the appropriate penalties was proposed vide the said show cause notice. The proposal was initially confirmed vide order-in-original No. 37/2020-2021 dated 19.02.2021. The appeal filed before the Commissioner (Appeals) against the said order has been rejected vide order-in-appeal No. 19/2021 dated 08.07.2022. Being aggrieved, the appellant is before this Tribunal.
2. I have heard Shri J.M. Sharma and Ms. Pooja Agarwal, learned Chartered Accountant for the appellant and Shri Mahesh Bhardwaj, learned authorized representative for the Department.
3. Learned Chartered Accountant for the appellant has submitted that the services availed by the appellants were in relation to the renovation, repairs, modernization of the factory of the appellants where he was manufacturing his final products.
3 EX/52181 OF 2022 It is submitted that the construction services in relation to repair, maintenance and modernization are well covered in the inclusive part of the definition of input service in CCR, 2004. The Adjudicating Authorities have wrongly considered the same as works contract services which fall under the exclusion clause of the definition of input. The findings of the Adjudicating Authority below, on both counts factual as well as legal, are apparently false. It is submitted that appellant had provided all the relevant documents including all the invoices as many 293 in number. The Original Adjudicating Authority had dropped the demand with respect to 58 number of invoices where the nature of service was specifically mentioned as maintenance, management or repair service. However, the remaining invoices where the nature of work was mentioned as erection commissioning or installation service, the Cenvat credit whereof has been disallowed.
4. It is mentioned that even the work of erection commissioning or installation was for the modernization of appellants premises. The same was duly shown to the audit team on this part. Still the show cause notice issued wrongly alleging the services received by the appellant to be of works contract services. The orders confirming the said proposal are therefore liable to be set aside on this sole ground. While submitting about invocation of extended period of limitation, while issuing the show cause notice after more than 2 years, it is submitted that the appellants were regularly filing their returns mentioning all requisite details the same was never objected by the 4 EX/52181 OF 2022 Department. The willful suppression has wrongly been alleged against the appellant. The show cause notice, as such, is barred by time. Based on these submissions, learned Chartered Accountant has prayed that the order under challenge/order-in- appeal to be set aside and appeal to be allowed. Learned Chartered Accountant has relied upon on the following decisions:-
(i) Blackrock Services India Pvt. Ltd. versus Commr.
of CGST, Gurgaon reported as 2022 (67) G.S.T.L. 447 (Tri. - Chan.) ;
(ii) Syndicate Bank versus Commissioner of Central Excise, Mangalore reported as 2022 (58) G.S.T.L. 440 (Tri. - Bang.) ;
(iii) Uniworth Textiles Ltd. versus Commissioner of Central Excise, Raipur reported as 2013 (288) E.L.T. 161 (S.C.) ; and
(iv) Continental Foundation Jt. Venture versus Commissioner of Central Excise, Chandigarh - I reported as 2007 (216) E.L.T. 177 (S.C.).
5. While rebutting these submissions, learned Departmental Representative has mentioned that the invoices through which the appellant had received maintenance and repair services, the proposed demand has already been dropped by the Adjudicating Authorities below for remaining 235 invoices the nature of services received are mentioned to be that of erection, commissioning and installation. The services fall within the definition of works contract service which stands excluded from the definition of input services post its amendment w.e.f. 01.07.2012. Hence, there is no illegality committed by the Adjudicating Authorities below while holding the works contract 5 EX/52181 OF 2022 service to be an ineligible input service and while denying the availment of Cenvat credit by the appellant on those services. With these submissions the appeal prayed to be dismissed.
6. Having heard the rival contentions, the moot question of adjudication appears to be as follows :-
Whether the services received by the appellants can be classified as works contract service on which the appellant was not supposed to avail the Cenvat credit. For the purpose the definition of works contract service need to be looked into.
Section 65B in 54 defines works contract as follows :-
"(54) "Works contract" means a contract wherein transfer of property in goods 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;"
7. No doubt the services as that of maintenance, repair, alteration etc. also gets the covered under definition, but simultaneously definition of input service in Section 2 (l) of Finance Act is perused w.e.f. 01.07.2012 i.e. for the period, in question, the definition reads as follows :-
"Rule 2(l) "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, 6 EX/52181 OF 2022 and includes services used in relation to modernisation, 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], -
(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 person; or
(b) an insurance company in respect of a motor vehicle insured or reinsured by such 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 vacation such as Leave or Home Travel Concession, when such services are used primarily for personal use or consumption of any employee; Clause (b) of Section 66E (also introduced w.e.f. 1.7.2012) of the Finance Act, 1994".
8. From the perusal of both the definitions, I observe that "modernization, renovation or repairs of a factory" are appearing in the inclusion part of the definition of input service. In the exclusion part such work contracts are covered where service element can be vivisected from the goods element and the 7 EX/52181 OF 2022 properly in those goods gets transferred in favour of the recipient. I don‟t find any evidence on record produced by the Department to prove that the construction services for the building/civil structure was for a building other than the factory premises of the appellant. Also there is no evidence to prove that properly in goods got transferred to appellant. In the absence thereof and from the perusal of the chart on record it is observed that most of the invoices irrespective those were of erection, commissioning and installation work but were for the manufacturing place of the appellant/the out locations of the appellant premises like office like gates, bridge lop, canteen, transformer, barricading, repair of drain cover, partition/furniture fixing, repair of boundary wall, maintenance of pond near hole shed, erection and fabrication of ABC area, erection and commissioning on RHS area etc. In light thereof I have no hesitation to accept the submission of the appellant that they were receiving the construction services for the repair, maintenance and modernization of their premises.
9. The inclusion of word maintenance, work etc. in definition of works contract services does not take maintenance service out of inclusion part till the service qualifies to be called as works contract service. Its stand already clarified and decided in several decisions. In the case of M/s Reliance Industries versus CCE & ST, Rajkot reported as 2022 - TIOL - 359 - CESTAT - AHM., it was held as follows :-
8 EX/52181 OF 2022 "The ECIS service was used for expansion, renovation and modernization of overall existing petroleum plant. As per inclusion clause of the definition the services relating to modernization, renovation is an admissible input service. In our view, even though service of construction of building or civil structure are falling under the exclusion clause but even if similar service is used for renovation and modernization of existing factory, the credit is admissible. The exclusion applies only in respect of such service as specified therein which are used for initial setting of the factory. It is pertinent to note that when the exclusion was brought in the rules, services relating to setting up of the factory was removed from the inclusion clause of the definition of input service in rule 2(l) of Cenvat Credit Rules, 2004 therefore, there is a direct nexus of the service mentioned in the exclusion clause and setting up of the factory. It is important to note that the legislature consciously continued the services of renovation, modernization, repairs appearing in the inclusion clause of definition of input service. This clearly shows that any service relating to modernization, renovation of the existing factory is admissible as input service which is the direct case of the appellant".
10. Earlier also in the case of Ion Exchange (I) Ltd. versus Commissioner of C. Ex., Cus. & S.T., Surat - II reported as 2018 (12) G.S.T.L. 302 (Tri. - Ahmd.) wherein it was held :-
"8. A plain reading of the said provisions makes it clear that service utilized in relation to modernization, renovation and repair of the factory are definitely fall within the meaning of „input service‟ even though; construction of a building or civil structure or part thereof has been placed under exclusion clause of the said definition of „input service‟. After amendment to the definition of the „input service‟, a clarification issued by the Board vide Circular No. 943/4/2011-CX, dated 29-4-2011 whereunder answering to the questions raised on the eligibility of credit of service tax paid on construction service as an „input service‟ used in modernization, renovation or repair, it has been clarified that the said services being provided in the inclusive part of definition of ‟input service‟ are definitely eligible to credit. Thus, harmonious reading of the inclusive part of the definition and the exclusion clause mentioned at clause
(a) relating to construction service of the definition of „input service‟, it is clear that the construction service relating to modernization, renovation and repair of the factory continued to be within the meaning of „input service‟ and accordingly, the Service Tax paid on such service is eligible to credit. Undisputedly, the appellant carried out modernization/renovation work to meet USA, FDA guidelines for manufacture of their products therefore, the service tax paid on such construction service is eligible to credit. In the result, the impugned order is set aside and the appeal is allowed with consequential relief, if any, as per the law".
9 EX/52181 OF 2022
11. Further, I observe that the Board Circular No. 943/4/2011- CX. dated 29.04.2011 clarifies as under :-
4. Is the credit of input Credit of input services used for repair services used for or renovation of factory or office is repair or renovation allowed. Services used in relation to of factory or office renovation or repairs of a factory, available? premises of provider of output service or an office relating to such factory or premises, are specifically provided for in the inclusive part of the definition of input services.
12. In the light of these decisions when read with the definitions as collected above, it becomes abruptly clear is that the specific disallowance of availment of Cenvat credit with respect to such construction/erection, installation and commission, services which are with respect to the new construction if undertaken by the assessee, however, there is no such specific disallowance in Rule 2 (i) of CCR, 2004 with respect to repair and maintenance work of the premises of the manufacturer. I draw support from decision of this Tribunal in the case of Balkrishna Industries Ltd. versus Commissioner of CGST & C. Ex., Alwar reported as 2022 (65) G.S.T.L. 247 (Tri. - Del.).
13. Coming to the issue of show cause notice being barred by time. I observe that there is no denial about appellant to be regular while filing its ST-3 returns specifically mentioning the respective Cenvat credit availed. In such circumstances, there appears no such evidence which may prove the alleged willful suppression on the part of the appellants. No doubt the appellant 10 EX/52181 OF 2022 was not required to give the details of disputed Cenvat credit in the ST-3 returns in as much as the appellant was not an output service provider, however, since appellant was duly filing the ST- 3 returns where the requisite details of Cenvat credit availed including the disputed amount were given the allegations of the department of suppression appears to be debarred allegations, as held by Hon‟ble Apex Court in the case of M/s Uniworth Textiles Ltd. versus Commissioner of Central Excise, Raipur reported as 2013 (288) E.L.T. 161 (S.C.)
14. In an earlier decision in the case of Continental Foundation Jt. Venture versus Commissioner of Central Excise, Chandigarh reported as 2007 (216) E.L.T. 177 (S.C.) the Hon‟ble Supreme Court in para 12 has held as under :
"12. As far as fraud and collusion are concerned, it is evident that the intent to evade duty is built into these very words. So far as mis- statement or suppression of facts are concerned, they are clearly qualified by the word „wilful‟, preceding the words "mis-statement or suppression of facts" which means with intent to evade duty. The next set of words „contravention of any of the provisions of this Act or Rules‟ are again qualified by the immediately following words „with intent to evade payment of duty.‟ Therefore, there cannot be suppression or mis-statement of fact, which is not wilful and yet constitute a permissible ground for the purpose of the proviso to Section 11A. Mis-statement of fact must be willful".
15. In the present case also, I observe that the show cause notice has not specified any commission or omission which may reveal intention to evade the payment of duty. The only allegation is that had the Department not conducted audit, the appellant would have succeeded to evade. The said allegation has no basis to stand otherwise also, it is observed that the show 11 EX/52181 OF 2022 cause notice was based on appellant‟s own documents i.e. the invoices as were maintained by them in accordance of business the returns were admittedly being filed in time mentioning required details about availment of credit. There is nothing on record which may be called as the proof for alleged suppression or mis-conduct. Resultantly I hold that the extended period of limitation has wrongly been invoked by the Department while issuing the impugned show cause notice.
16. The order under challenge is also liable to be set aside for an apparent ambiguity in the show cause notice itself i.e. the authority issuing show cause notice itself was not sure as to whether the services are merely the construction services in their own building. Appellant has produced on record enough document in the form of several invoices that the services in the construction/erection, commissioning and installation services, but those were meant purely for maintenance/repair/ modernization of appellant‟s own premises. I also observe that the demand with respect to 58 invoices has been dropped by the Department where the nature of service was specifically mentioned as maintenance and repair service. With respect to remaining 235 invoices also, the services were purely for maintenance and repair only this fact has miserably been ignored by the Department. No evidence has been produced on record to show that the services in those 235 invoices were purely in the nature of works contract service as different from maintenance, repair for fixed steel premises.
12 EX/52181 OF 2022
17. In the light of above discussion, I hold that the order under challenge is not sustainable. Same is accordingly hereby set aside. Consequent thereto the appeal stands allowed.
(Order pronounced in open court on 13/07/2023.) (DR. RACHNA GUPTA) MEMBER (JUDICIAL) PK