Custom, Excise & Service Tax Tribunal
M/S. Rastriya Ispat Nigam Ltd vs Cce,C&St, Visakhapatnam on 1 April, 2016
CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL REGIONAL BENCH AT HYDERABAD Bench SMB Court I Appeal No.E/22333/2015 (Arising out of Order-in-original No.VIZ-EXCUS-002-COM-15/15-16 dt. 17/08/2015 passed by Principal Commissioner of CE,C&ST, Visakhapatnam) For approval and signature: Honble Ms. Sulekha Beevi, C.S., Member(Judicial) 1. Whether Press Reporters may be allowed to see the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982? 2. Whether it should be released under Rule 27 of the CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not? 3. Whether their Lordship wish to see the fair copy of the Order? 4. Whether Order is to be circulated to the Departmental authorities? M/s. Rastriya Ispat Nigam Ltd. ..Appellant(s) Vs. CCE,C&ST, Visakhapatnam ..Respondent(s)
Appearance Shri G. Prahlad, Authorised representative for the appellant.
Shri Arun Kumar, Authorised representative for the respondent.
Coram:
Honble Ms. Sulekha Beevi, C.S., Member(Judicial) Date of Hearing:16/03/2016 Date of decision:.
FINAL ORDER No._______________________ [Order per: Sulekha Beevi, C.S.] The appellant M/s. Rashtriya Ispat Nigam Ltd. was served with a show-cause notice, inter-alia, proposing to disallow service tax credit of Rs.64,85,30,564/-. After due process of law, the original authority disallowed credit of Rs.13,84,799/- in respect of works contract service claimed to have been received as per invoice No.01/01 dt. 09/02/2013, the bill period being 26/01/2008 to 31/01/2013 issued by M/s. Vijaya Engineering Works. The original authority dropped proceedings in respect of an amount of Rs.64,57,60,966/-. The appellant had already reversed credit of Rs.10,39,634/- admitting the ineligibility of credit. In the order-in-original, the original authority confirmed the demand of interest on Rs.10,39,634/- till the date of reversal, and also confirmed the demand of Rs.13,84,799/- along with interest besides imposing equal amount of penalty on this demand. The present appeal is filed challenging i) the confirmation of demand of Rs.13,84,799/-, ii) the demand of interest on Rs.10,39,634/- being the credit reversed by appellant before utilization.
2. On behalf of the appellant, the learned counsel Shri G. Prahlad submitted that the lower authority has denied credit of Rs.13,84,799/- holding that w.e.f. 01/04/2011, the definition of input services expressly excludes the services availed for construction of building or civil structure or parts thereof. He submitted that the appellants had availed credit in respect of invoice No.01/01 dated 09/02/2013 issued by M/s. Vijaya Engineering Works showing the bill period 26/01/2008 to 31/01/2013 relating to works contract service for laying of pipe works in the factory for supply of water to the raw material plant. He contended that laying pipe line or conduit is distinct and different from construction of a building or civil structure or part thereof. That w.e.f. 01/04/2011, the definition of input services excludes services related to construction of a building or civil structure or part thereof and not with regard to input services related to construction of pipeline or conduit. To support his arguments, he referred to the definition of input services w.e.f. 01/04/2011 and the definition of construction service under Section 65(25b) of the Finance Act 1994. The appellant availed credit on input services used for works contract relating to erection of underground pipe and over ground pipe for supply of water to raw material plant of appellant and that such works contract is not excluded as per the exclusion clause of the definition of input services contained in Rule 2(l) of CENVAT Credit Rules 2004. To fortify his arguments, he placed reliance on the Advance Ruling in GSPL India Transco Ltd. [2015(40) STR 393 (A.A.R)].
3. The second issue in the appeal is with regard to demand of interest on the credit of Rs.10,39,634/- which was reversed by the appellant before utilization. The learned counsel relied upon the judgment laid in CCE&ST, LTU, Bangalore Vs. Bill Forge (P) Ltd. [2012(279) ELT 209 (Kar.)], CE Vs. Strategic Engineering (P) Ltd. [2014(310) ELT 509 (Mad.)] and in Grasim Bhiwani Textiles Ltd. Vs. CCE, Rohtak [2016(232) ELT 865 (Tri. Del.)].
4. On behalf of the Revenue, the learned AR Shri Arunkumar supported the findings in the impugned order. He submitted that the period involved is after 01/04/2011. The definition of input services after 01/04/2011 excludes the services insofar as they are used for construction or execution of works contract of a building or a civil structure or a part thereof. That laying of pipe or conduit is included in the construction of building or civil structure or part thereof and that therefore the credit is not admissible. With regard to the second issue of demand of interest on the amount of credit which was reversed by the appellant before utilisation, the learned AR submitted that the demand is legal and proper.
5. I have heard the rival submissions and perused the appeal records.
6. The invoice No.01/01 dated 09/02/2013 shows the description of service as works contract service. The description of the work mentioned in the invoice is underground and over ground pipe works. The credit availed is Rs.13,84799/-. The credit has been denied on the ground that the definition of input service w.e.f. 01/04/2011 excludes the services availed for construction or execution of works contract of a building or a civil structure or a part thereof. The issue that arises for consideration is whether the works of laying of pipes comes within the ambit of works contract which is expressly excluded in the definition of input services. For better appreciation, the definition of input service is noticed as under:-
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, 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 services,-
(A) specified in sub-clauses (p), (zn), (zzl), (zzm), (zzp), (zzzh) and (zzzza) of clause (105) of section 65 of the Finance Act (hereinafter referred as specified services), insofar 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, except for the provision of one or more of the specified services;
It is the case of appellant that the exclusion portion of the definition excludes only those services specified in sub-clause (p), (zn), (zzl), (zzm), (zzp), (zzzh) and (zzzza) of clause (105) of Section 65 of the Finance Act, insofar as they relate to:-
(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
7. The main argument of the appellant is that the works contract service relating to laying/erection of underground / over ground pipe line is not included in the exclusion portion of the definition of input service. According to him, the services of construction of a building or a civil structure or a part thereof is entirely different and distinct service from construction of pipeline or conduit. For this learned counsel draws reference from the definition of construction service provided in under Section 65(25b) of the Finance Act, 1994, which is as under:-
"Commercial or Industrial Construction" means -
(a) construction of a new building or a civil structure or a part thereof; or
(b) construction of pipeline or conduit; or
(c) completion and finishing services such as glazing, plastering, painting, floor and wall tiling, wall covering and wall papering, wood and metal joinery and carpentry, fencing and railing, construction of swimming pools, acoustic applications or fittings and other similar services, in relation to building or civil structure; or
(d) repair, alteration, renovation or restoration of, or similar services in relation to, building or civil structure, pipeline or conduit,
8. In the above definition, the two services are given under two different sub-clauses which means that construction of pipeline or conduit cannot be considered to be part of construction of building or civil structure. Similarly, sub-clause (b) of definition of works contract service contained in sub-clause (zzzza) of Section 65(105) of the Finance Act, 1994 is also noteworthy in this regard which is reproduced as under:-
(b) construction of a new building or a civil structure or a part thereof, or of a pipeline or conduit, primarily for the purpose of commerce or industry.
9. If one goes through the above provisions, the contention of the appellant that construction of a pipeline or conduit is distinct from the service of construction of a building or a civil structure or part thereof is not without merits. Wherever the legislature wanted to include the construction of a pipeline or conduit, it has been specifically mentioned separately in the definition. This itself would indicate that erection/construction of pipeline or conduit cannot be considered as part of construction of building of civil structure or part thereof.
10. The Authority of Advance Ruling, New Delhi in GSPL India Transco Ltd. (supra) had occasion to analyse similar issue. The observations in the said decision is reproduced as under:-
13. Rule 3(1) of CENVAT Credit Rules, 2004 inter alia envisages that a provider of output service shall be allowed to take credit of Service Tax leviable under Section 66B of the Finance Act, 1994, paid on any input service by the provider of output services. There is no doubt that the applicant is provider of output service i.e. transport of gas through pipeline and therefore, eligible to take credit of service tax paid on input service i.e. construction/erection, installation and commissioning by EPC contractors/third party. Further, as per rule 2(l) ibid, input service inter alia means any service used by a provider of output service for providing an output service. However, it excludes services portion in the execution of works contract and construction services. It has been correctly pointed out by the applicant that service of laying of pipeline is different from construction of building or a civil structure, as under erstwhile Section 65(25b) of the Finance Act, 1994, commercial and industrial service meant (a) construction of a new building or a civil structure or a part thereof, or industrial construction service meant construction of a new building or civil structure or a part thereof; or (b) construction of pipeline or conduit; or .. it is clear from above that construction of a building or a civil structure are different than construction of laying of pipeline and would not come under the exclusion clause (a) above i.e. construction or execution of works contract of a building or civil structure.
11. In the said judgment, the credit availed of service tax paid on construction services for laying pipeline was held to be admissible. A plain reading of the definitions noticed above makes it sufficiently clear that laying of pipeline is different from construction of building or civil structure. Undisputedly, in the present case, the service tax was paid on works contract for laying pipe over the ground and under to supply water to the raw material plant. Form the above discussions, I am able to hold that appellant is eligible for credit on service tax paid on works contract services relating to erection / construction of underground pipe and over ground pipelines for supply of water to raw material plant as the work of construction of pipeline or conduit do not fall in the exclusion portion of the definition of input services.
12. The second issue is whether the appellant is liable to pay interest on the amount of credit of Rs.10,39,634/- which was reversed by them before utilization. The issue is settled in the cases of Bill Forge (P) Ltd. case and Strategic Engineering (P) Ltd. case. Applying the dictum laid in these judgments, I hold that appellant is not liable to pay interest on the credit which was reversed before utilization. Both the issues are found in favour of the appellant.
13. In the result, the appeal is allowed with consequential reliefs, if any.
(Pronounced in open court on ..) SULEKHA BEEVI C.S. MEMBER(JUDICIAL) Raja.
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