Custom, Excise & Service Tax Tribunal
Phalnax Labs Pvt Ltd vs Visakhapatnam - G S T on 6 September, 2018
(1)
Appeals No: E/30482/2018
CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL
REGIONAL BENCH AT HYDERABAD
Single Member Bench
Court - I
Appeal No. E/30482/2018
(Arising out of Order-in-Appeal No. VIZ-EXCUS-002-APP-110-17-18, Dated 19.01.2018 passed
by CCE C&ST, Visakhapatnam)
PHALNAX LABS Pvt. Ltd. .. Appellant
Vs
CCT, Visakhapatnam GST .. Respondent
Appearance Shri M.V.S. Sridhar, Advocate for the Appellant.
Shri Arun Kumar, Dy.Commissioner /AR for the Respondent. Coram:
Hon'ble Mr. M.V. Ravindran, MEMBER (JUDICIAL) Date of Hearing: 06.09.2018 Date of Decision: 06.09.2018 FINAL ORDER No. A/31190/2018 [Order per: Mr. M.V. Ravindran]
1. This appeal is directed against Order-in-Appeal No. VIZ-EXCUS-
002-APP-110-17-18, Dated 19.01.2018.
2. Heard both sides and perused the records.
3. The relevant issue that falls for consideration is on scrutiny of appellant's records, it was noticed by the audit party that appellant had availed ineligible CENVAT credit in respect of services rendered by the (2) Appeals No: E/30482/2018 service providers while setting up of their plant. Show cause notice was issued for demand and reversal of such CENVAT credit. Appellant contested the show cause notice on merits as well as on limitation. Adjudicating authority, after following due process of law, dropped the proceedings in respect of the demand raised for the recovery of Rs.1,09,932/- while confirming demand of Rs. 9,61,652/-as ineligible CENVAT credit, interest thereof and imposed penalty of Rs. 4,80,826/-. An appeal was filed against such an order was rejected by the first appellate authority. Hence this appeal.
4. Ld. Counsel after drawing the attention of the Bench to the facts of the case submits that the services which were rendered by the service providers as per Annexure-B to the show cause notice were labour charges for fixing and erection of equipment, labour charges for provision to HDPE pipe line work, installation of HT yard, insulation work, fixing and erection of equipments and various other activities which are related to the machineries which were installed or to be installed and would not fall under the exclusion of clause of input service Rule 2(l) of the CENVAT credit Rules, 2004. He would draw my attention to the said definition and submits that what is contemplated from this view. CENVAT credit of service tax paid on the services for construction of works contract of a building or a civil structure or part thereof or laying of foundation and making of structures for support of capital goods. It is his submission that both the exclusion clauses would not apply to them. It is his further submission that the adjudicating authority has considered the activity of the service provider as (3) Appeals No: E/30482/2018 works contract which is not a case as these are the labour charges which are awarded to the contractor.
5. Ld. DR on the other hand draws my attention to the findings recorded by the first appellate authority in paras 11 to 13 of the Order-in- Appeal. It is his submission that the first appellate authority has recorded that these services which are received by the appellant are not co- extensively used to the manufacture of final products and the Hon'ble High Court of Andhra Pradesh in the case of Rayalaseema Hi-Strength Hype Limited [2012(278)E.L.T 167 (AP)] has specifically recorded that unless the gods are used in the manufacture of capital goods, CENVAT credit cannot be claimed even on the repair and maintenance as for manufacture and the repair and maintenance of the plant can not be constituents in the process of manufacture of final products.
6. I have considered the submissions made at length and perused the records. As correctly pointed out by both sides, the issue is regarding availability of CENVAT credit of the service tax on labour charges which were for fixing and erection of equipments, buffing work, fixation and erection of equipment work, insulation work etc. for the activity undertaken by the service providers in the factory premises. It would be important to reproduce the definition of input service under Rule 2(l) of CENVAT Credit Rules 2004 as exist during the relevant period in question: (4)
Appeals No: E/30482/2018 "RULE 2(l) : Input Services "Input Service" means any service,-
(i) used by a provider of output service for providing an output service; or
(ii) used by the manufacturer, whether directly or indirectly, in or in relation to the manufacture of final products and clearance of final products, up to 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 up to 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 up to 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"
7. From the above reproduced definition, it seems that Revenue wants to deny the CENVAT credit to the appellant on the ground that input services were covered in the Exclusion Clause A(b) laying of foundation or making of structure for support of capital goods. From the allegation in the (5) Appeals No: E/30482/2018 show cause notice and the Annexure-B to the show cause notice, I find that the services which were rendered by the service providers were in respect of capital goods and not for laying of foundation or making structures for support of capital goods. Further, it has to be recorded in the findings of the first appellate authority that these services were not used co- extensively for manufacture of final products, also seems to be not correct from the factual position as the appellant herein being the manufacturer of bulk drugs, requires installation of various plant and machinery which would contribute towards manufacture of final products. It has also to be seen that the definition of input service (as reproduced herein above) clearly mandates for availing CENVAT credit of the service tax paid on services which were used by manufacturers directly or indirectly, in or in relation for the manufacture and clearance of final products. In the case in hand, it cannot be said that the services rendered by service providers on various activities as enumerated in Annexure-B to the show cause notice were in respect of equipments which are not used for manufacturing of final products. If that be so, the law is now clearly settled as to what would be "directly or indirectly or in relation to manufacture as the foundation or making structures for support are in respect of the capital goods.
8. The reliance placed by Ld. DR on the judgment of Hon'ble High Court of Andhra Pradesh in the case of Rayalaseema Hi-Strength Hype Limited (supra), would not carry his case any further, I find that in the judgment, their Lordships were considering the eligibility to avail CENVAT credit on inputs but not input services and definition of same mandates the (6) Appeals No: E/30482/2018 appellant to avail CENVAT credit. Since the fact involved in the case in hand is totally different, the reliance placed on the decision of Rayalaseema Hi-Strength Hype Limited case will not carry the case of Revenue any further.
9. In view of the foregoing, I find that the impugned order is unsustainable and liable to be set aside and I do so.
10. Impugned order is set aside and appeal is allowed.
(Dictated and Pronounced in open Court) (M.V. RAVINDRAN) MEMBER (JUDICIAL) vrg