Custom, Excise & Service Tax Tribunal
Nemak Aluminium Castings India Pvt Ltd vs Chennai-Iii on 4 July, 2025
IN THE CUSTOMS, EXCISE & SERVICE TAX
APPELLATE TRIBUNAL, CHENNAI
Excise Appeal No.41114 of 2015
(Arising out of Order-in-Original No.3/2015 (CE) dated 13.2.2015 passed by the
Commissioner of Central Excise, Chennai - III)
M/s. Nemak Aluminium Castings (I) Pvt. Ltd. Appellant
Ford Suppliers Park II
Chitamannur Village
Melrosapuram Post
Chengalpattu - 603 204.
Vs.
Commissioner of GST & Central Excise Respondent
Chennai Outer Commissionerate Newry Towers, 12th Main Road Anna Nagar, Chennai - 600 040.
APPEARANCE:
Shri M.N. Bharathi, Advocate for the Appellant Shri Sanjay Kakkar, Authorized Representative for the Respondent CORAM Hon'ble Shri P. Dinesha, Member (Judicial) Hon'ble Shri M. Ajit Kumar, Member (Technical) FINAL ORDER NO. 40700/2025 Date of Hearing : 10.01.2025 Date of Decision: 04.07.2025 Per M. Ajit Kumar, This appeal is filed against Order in Original No. 3/2015-CE dated 13.2.2015 passed by the Commissioner of Central Excise, Chennai -
III Commissionerate (impugned order).
2. Brief facts of the case are that the appellant is engaged in the manufacture of block cylinders and head cylinders of engines suitable for motor vehicles falling under Heading 84099191 of CETA, 1985. The appellant availed CENVAT credit of duty paid on the inputs, capital goods and input services and utilized the same for payment of duty on the goods manufactured by them. Based on specific intelligence that 2 the appellant availed CENVAT credit of Service Tax on certain ineligible services that were used for initial setting up of the new factory, such as landscaping, long term lease rent, basic infrastructure development services like electricity, blacktopping of roads, erection of prefabricated factory sheds, installation of firefighting equipment and new electrical installations, new interior designing and furniture etc. from different service providers at the time of inception of the factory premises including the office building housed therein input credit was sought to be denied. The department was of the view that since the words 'input services in relation to setting up of factory' was deleted from Rule 2(l) 0f the Cenvat Credit Rules, 2004 - (CCR), vide Notification No. 03/2011-CE (NT) dated 01.03.2011, credit had been wrongly availed on the said services. After due process of law, the Ld. Adjudicating Authority ordered recovery of ineligible CENVAT credit of Rs.1,40,23,919/- along with interest and imposed equal penalty under sec. 11AC of the Central Excise Act, 1944. Hence the present appeal.
3. Shri M.N. Bharathi, Ld. Advocate appeared for the appellant and Shri Sanjay Kakkar, Ld. Authorized Representative appeared for the respondent.
3.1 Shri M.N. Bharathi the Ld. Advocate for the appellant submitted that the services in question for which Cenvat Credit was denied during the period 01.01.2011 to 01.10.2013 related to 'input services in relation to setting up of factory' which was deleted from 01.04.2011 vide Notification No. 03/2011-CE (NT) dated 01.03.2011. The issue is no more res integra in view of the following decisions:
A. M/s. Saint Gobain India Limited Versus Commissioner of Central Excise and Service Tax - 2023(11) TMI 522- Cestat Chennai 3 B. M/s. Aditya Aluminium VS Commissioner of Central Excise, Customs and Service Tax, Bhubaneswar - 2023-TIOL- S02-CESTAT-KOL He stated that even after the deletion of the words 'input services in relation to 'setting up' of factory from 01.04.2011, the eligibility to credit was retained in the main part of 'input service' definition which clearly envisages that 'input service' means any service 'used by the manufacturer, whether directly or indirectly in or in relation to the manufacture of final products, upto the place of removal". It could be seen from the agreement with M/s. Ford India P Ltd that the lessor viz M/s. Ford India P. Ltd would conduct an environment due diligences to test the quality of environment including the soil and ground water in the demised land and the lessee viz., the appellants would use the land only for purpose of manufacturing/assembling parts/components to be supplied to the lessor's integrated manufacturing activity. Apart from the above, service tax paid on leasing of space for manufacturing operations i.e., lease rent paid will also be eligible to Cenvat credit as an individual service provided by M/s. Ford India Ltd. As per the Basic infrastructure Development Agreement, M/s. Ford India had agreed to develop basic infrastructure to enable the appellants to put up the plant and supply of power to the plant. Infrastructure development included facilities like industrial water supply pipeline, pump house and water tanks and fire protection and sub-station for power supply. From the scope of work it is clear that the services provided by M/s. Ford India Ltd were in or in relation to manufacture of products to be supplied. The Ld. Counsel also submitted that deletion of an expression can also be made by government, if it is found that such retention of the expression in the definition would be unnecessary when such 4 expression is already indirectly covered in the main part of the definition. Furter the appellant submits that the Show Cause Notice has not invoked any essential ingredients for invoking the extended period. Moreover, the entire issue is related to interpretation of law which will indicate that when there is scope for different interpretation on eligibility to credit longer period of time limit cannot be invoked. Therefore, the invoking of extended period of time limit and imposition of penalty under sec.11AC read with Cenvat Credit Rule 15(2) is not proper. He prayed for setting aside the impugned order and granting consequential relief.
3.2 The Ld. AR Shri Sanjay Kakkar for the respondent has reiterated the points given in the impugned order. He has stated that the amendment to a section cannot be held to be redundant and the same legal position cannot be maintained before and after the section was amended. He prayed that the appeal may be rejected.
4. We have heard the rival parties and have carefully gone through the appeal. We find that the legal dispute pertains to whether the deletion of the phrase 'input services in relation to setting up of factory' found in Rule 2(l) of the CCR, from 01.04.2011, would have any material effect in denying such services Cenvat credit or whether the deletion was only of superfluous words and credit continues to be eligible for the impugned services. A secondary issue relates to the invoking of the extended time period with penalty etc. The 'Grounds of Appeal' states as under;
The issues to be decided in this appeal are:-
i. Whether services in question for which CENVAT credit is denied are covered under 'input services in relation to setting up of factory' which existed prior to 01.04.2011 and credit can be denied on this count as from 01.04.2011, input 5 services in relation to 'setting up' of a factory were deleted from the inclusive portion of definition of 'input service'? ii. Whether, even otherwise, the deletion of 'setting up' of factory from the definition of 'input service' would mean that such services are not eligible to CENVAT credit? iii. Whether in the facts and circumstances of the case, extended period of time limit could be invoked? And penalty under sec. 11AC of the CE Act and Rule 15 of CENVAT Credit Rules could be imposed?
5. The relevant portion of Rule 2(l) as it stood w.e.f 01.04.2011 is reproduced here for ease of reference:-
"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, remises, 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."
6. In M/s ADITYA ALUMINIUM Vs COMMISSIONER OF CENTRAL EXCISE, CUSTOMS AND SERVICE TAX [2023-TIOL- 802-CESTAT-KOL], CESTAT Kolkata examined a similar case where credit availed by the appellant was denied on the ground that credit is related to 'setting up' of a factory, had been specifically omitted from the 'includes' part of the definition of 'input services' in the CCR. The Tribunal held;
"8. We observe that the aforesaid definition has three limbs- (1) 'means clause' (2) 'includes clause' (3) 'excludes clause'. It is seen that the credit in dispute, which was availed during the relevant period, were inter alia used for setting up of the plant. These input services are directly linked to the manufacture of the final product in as much as without availing the aforesaid services, the Appellant 6 could not have set up the factory for manufacture of the goods. Hence, the input services utilized for setting up of a factor are covered within the ambit of 'means clause' i.e. service "used by a manufacturer whether directly or indirectly in or in relation to the manufacture of the final products". Since the subject input service07s are covered in the 'main clause' of the definition of input service, unless it is specifically excluded under the excludes clause of the definition, the Appellant is entitled to CENVAT Credit on the subject input services used in setting up of the factory. This view has been held by the Tribunal in the case of Pepsico India Holdings Pvt. Ltd., Vs. CCT, Tirupati, 2021 (7) TMI 1094-CESTAT Hyderabad = 2021- TIOL-448-CESTAT-HYD.
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11. . . . we observe that the subject input services have a direct nexus with the manufacture of finished goods in the 'means' clause of the definition of input services. Accordingly we hold that even if the word 'setting up of a factory' has been specifically excluded from the definition w.e.f.01.04.2011, such services are covered within the ambit of main clause of the definition. Hence , it would still qualify as an input service as per Rule 1(I) of CCR, 2004. In the light of the above discussions, we allow the Cenvat credit availed by the Appellant on the input services used in setting up of the factory. Consequently, the impugned order confirming the demand along with interest and imposing penalty is set aside."
7. A similar view was taken by a Coordinate Bench of this Tribunal in M/s Saint Gobain Glass India Limited Vs Commissioner of Central Excise and Service Tax [2023 (11) TMI 522 - CESTAT CHENNAI], after referring to a large number of judgments.
8. In PEPSICO INDIA HOLDINGS (PVT.) LTD. VERSUS COMMISSIONER OF CENTRAL TAX, TIRUPATI [2021 (7) TMI 1094
- CESTAT HYDERABAD], a coordinate Bench of this Tribunal after examining the issue held as under;
21. For a service to qualify as 'input service' under CENVAT Credit Rules, 2004 post 2011, the service in question need not be covered even by the very wide definition of manufacture under section 2(f) of the Central Excise Act. Any service which is used not only in manufacture but also 'in relation to' manufacture will also qualify as input service. The scope of input service is further enlarged with the expression whether directly or indirectly used in the definition of input service. Thus, there are:
a) Actual manufacture;
b) Processes incidental or ancillary to manufacture which are
also manufacture;
7
c) Activities directly in relation to manufacture (i.e., in relation to
'a' and 'b' above);
d) Activities indirectly in relation to manufacture (i.e., in relation
to 'a' and 'b' above);
22. All four of the above qualify as input service as per Rule 2(l)(ii) as applicable post 1.4.2011. Although setting up the factory is not manufacture in itself, it is an activity directly in relation to manufacture. Without setting up the factory, there cannot be any manufacture. Services used in setting up the factory are, therefore, unambiguously covered as 'input services' under Rule 2 (l) (ii) of the CENVAT Credit Rules, 2004 as they stood during the relevant period (post 1.4.2011). The mere fact that it is again not mentioned in the inclusive part of the definition makes no difference. Once it is covered in the main part of the definition of input service, unless it is specifically excluded under the exclusion part of the definition, the appellant is entitled to CENVAT credit on the input services used. This Bench has already taken this view in Kellogs. Similar views have been taken by the other Benches in the other cases mentioned above.
23. In view of the above, the impugned orders denying CENVAT credit and ordering its recovery along with interest and imposing penalties cannot be sustained. The impugned orders are set aside and the appeals are allowed with consequential reliefs, if any.
(emphasis as in original)
9. The question of law involved is hence settled in favour of the appellant. Judicial discipline requires us to follow the judgment of the Coordinate Bench, especially when the issues therein are similar. This being so the issue of the extended period of time and penalty etc. does not survive.
10. Accordingly, we set aside the impugned order and allow the appeal. The appellant is eligible for consequential relief, if any, as per law. The appeal is disposed of accordingly.
(Order pronounced in open court on 04.07.2025) (M. AJIT KUMAR) (P. DINESHA) Member (Technical) Member (Judicial) Rex