Commissioner Of Central Excise vs Mirra & Mirra Industries

[Arising out of Order-in-Appeal No153/2015 (CXA-I) dt.1.10.2015 passed by the Commissioner of Central Excise (Appeals-I), Chennai]

Commissioner of Central Excise Chennai

Appellant

Versus

Mirra & Mirra Industries Respondent

Appearance:

Shri S. Nagalingam, AC (A.R) For the Appellant Shri T.R. Ramesh, Advocate For the Respondent

CORAM:

Honble Shri P.K.Choudhary, Judicial Member

Date of hearing/decision :07.09.2016

FINAL ORDER No.41534/2016

Revenue has filed this appeal against the order of the Commissioner (Appeals).

2. The facts of the case are that the respondents are manufactures of bars and rods of other alloy steel, ingots, shapes, sections of other alloy steel and have availed credit of service tax paid on commercial construction services used for the construction of annealing sheds, pickling sheds, EB room, wire drawing room, compound wall, rest room, toilet, security room, overhead tank, road laying etc. It was alleged that the assessee had contravened the provisions of Rule 2 (l) and Rule 3 of CCR 2004 by availing credit on ineligible input services as the said services have not been used for providing any output service as well as the said services are not used by the respondents directly or indirectly, in or in relation to the manufacture of final products and for clearances of final products. SCN was issued and demand was confirmed along with interest and penalties. The respondents filed an appeal before the LAA who allowed the appeal by setting aside the OIO. Aggrieved by the order of the learned Commissioner (Appeals), the Revenue is in appeal before this Tribunal.

2. The sole issue in this case to be decided is whether the respondents are entitled to avail input service credit of service tax paid on construction in the factory premises during the period December 2007 and the bills have been raised by the contractor and service provider and the last payment for the bills were made on 1.12.2007. The service tax has been charged on the construction service by the service provider which was paid by the appellant. The appellant took credit of the tax paid on input service.

3. The Ld. A.R. appearing for appellant-Revenue submits that though annealing sheds, pickling sheds, EB room and wire drawing room can be accepted as eligible for availing credit of input service but the compound wall, rest room, toilet, security room, overhead tank, road laying activities are not all necessary for the respondents in order to run their manufacturing activities. In support of his submissions, he filed a copy of the Boards clarification dt. 29.4.2011 and referred to Sl.No.4 therein which reads as under :

S.No. Issue Clarification

4. Is the credit of input services used Credit of input for repair or renovation of factory services used for or office available ? repair or renovation of factory of office is allowed. Services used in relation to renovation or repairs of a factory, 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.

He further submits that the above mentioned constructions are not integral part of the factory and hence it does cover under the definition of input service and accordingly respondents are not entitled to take credit of input service on the construction of compound wall, rest room, toilet etc.

4. On the other hand, Ld. Advocate appearing on behalf of the respondents submitted that all the facilities constructed are necessary to run the factory smoothly and if there is no compound wall, it will raise the issues of security threat of raw materials, finished products or machineries from the factory premises. He also drew my attention to the Boards circular filed by Ld. A.R issued by TRU, Ministry of Finance wherein at S.No. 12, the issue was  Is the credit available on services received before 1.4.2011 on which credit is not allowed now ? e.g. rent-a-cab-service. The clarification was given as follows :-

Credit of such services was available if its provision had been completed before 1.4.2011.

Ld. Counsel also argued that the activity supports manufacture both directly or indirectly. He relied on the following case laws :-

(1) CCE Pune Vs Raymond Zambaiti Pvt. Ltd. 2012 (278) ELT 535 (2) ISMT Ltd. Vs CCE Aurangabad 2015 (37) STR 148 (Tri.-Mumbai) (3) CCE Chennai Vs Visteon Powertrain Control Systems (P) Ltd. - 2016 (41) STR 168 (Mad.)

5. Heard both sides. On going through the appeal records, I find that the adjudicating authority has denied the input service credit on the construction of compound wall etc. on the ground that these are not directly or indirectly related to the process of manufacture. The law does not permit or allow the service tax paid on every construction services to be availed as credit. The appellate authority allowed the cenvat credit on the basis of Bombay High Court judgement in the case of CCE Nagpur Vs Ultratech Cement Ltd.  2010 (20) STR 577 (Bom.). The processing of goods was in relation to manufacture implies not only production but the various stages through which the raw material is subjected to change by different operations. It is the cumulative effect of the various processes through which the raw material is subjected, the manufactured product emerges. Therefore, each step towards such production would be a process in relation to the manufacture. Whether any particular process is so integrally connected with the ultimate production of goods but for that, process, manufacture or processing of goods would be impossible or commercially inexpedient, that process is the one in relation to the manufacture.

There is no warrant for limiting the meaning of expression in the manufacture of goods through the process of production of goods. In the instant case, I find that the construction of compound wall, rest room, toilet, security room, overhead tank, road laying activity project work or CC work, painting work, annealing sheds, pickling sheds, EB room, wire drawing room are all necessary to run the factory or not depends on the activity undertaken by the manufacture or as per the requirement of their manufacturing activity. In this case, from the facts, it emerges that all the constructions are integral part of the factory and hence credit taken over the input services by the respondents is eligible. I also find that in view of the clarification issued by the Boards circular dt. 29.4.2011 cited (supra) and in view of the fact that the services have been rendered and billed prior to 1.4.2011 for which payment has also been paid on 1.12.2007 i.e. prior to 1.4.2011. Hence in this view of the matter also, the input service tax credit is eligible as clarified by the above mentioned Boards circular.

I also find that in Para-20 of the grounds of appeal, the appellants have raised the issue of corrigendum dt. 21.4.2014 to the OIO. In this regard, I find that the learned Commissioner (Appeals) has dealt with this issue in detail in para-10 (i) of the OIA and I concur with his views. Accordingly, I do not find any merit in the appeal filed by Revenue and I uphold the order of the learned Commissioner (Appeals). The appeal filed by Revenue is rejected.

(Operative part of the order pronounced in open court on 07.09.2016)

(P.K.CHOUDHARY) JUDICIAL MEMBER

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