Manufacturing & Packaging Of Cement Not Civil Construction Activities; CENVAT Credit Cannot Be Denied: CESTAT Bangalore

Regarding the allegation of ineligible CENVAT credit availed by the assessee on lease premium, the bench consists of P.A. Augustian (Judicial Member) and Pullela Nageswara Rao (Technical Member) found that since the disputed services were ultimately meant for accomplishing the objective of providing the output service, it cannot be said that since the phrase 'setting up' was specifically excluded in the inclusive part of definition of input service, the benefit of CENVAT credit should be denied.

In this case, the assessee/appellant is a manufacturer of cement and started the activity of packing cement in Cochin in October 2015.

During the Audit by the Additional Director General of Audit, it was observed that the assessee had not paid the central excise duty correctly for the MRP-based clearances and also availed ineligible CENVAT Credit of input services.

During the course of the audit, the assessee paid the alleged short payment and reversed the amount in the CENVAT account. However, has not paid interest and penalty on the short payment.

Further, it is alleged that the assessee has availed ineligible CENVAT credit of input services on the strength of invoices issued by service providers and started utilising this credit for the payment of central excise duty for the clearance made from October 2015 onwards.

Further, out of the total amount of Rs. 6,54,97,114/- of ineligible CENVAT credit, an amount of Rs. 6,18,00,000/- pertains to the service tax paid on the upfront charges for the lease rent of land taken from Cochin Port Trust for setting up a factory in Willingdon Island.

Since the said credit is taken while setting up the unit, alleging various omissions, show cause notices were issued, and the Adjudication authority, as per the impugned order, confirmed the demand.

The assessee submitted that the leasing of land has an inextricable nexus with the assessee's manufacturing operations and the same will qualify as an eligible input service. It was submitted that since there was no amendment whatsoever carried out in the means clause of the definition, the CENVAT credit availed by the assessee is in order.

The bench noted that the payment of service tax and the credit was taken by the ISD office at Bangalore, and thereafter said the ISD office, which, undisputedly, has borne the incidence of tax, has distributed CENVAT Credit to the assessee. Thus, the CENVAT credit pertains to the service tax paid by the marketing office of the assessee in respect of input services used for marketing of the final product, and it is in relation to the manufacture of the final product.

The Tribunal held that the assessee is eligible to avail the credit of service tax paid on the event management services utilised for organising various events for prospective clients/employees.

As regards denial of credit in respect of services received in the form of repainting work, the bench found that CENVAT Credit Rules, 2004, exclude only a specific type of works contract which is in the nature of works contract/construction of civil structure building, as well as construction of support structure for capital goods. However, the activities undertaken by the assessee are works service contracts and not for the construction of a building or civil structure for the denial of CENVAT credit.

In view of the above, the Tribunal allowed the appeal.

Case Title: M/s. Zuari Cement Limited v. Commissioner of Central Tax & Central Excise

Case Number: Central Excise Appeal No. 20591 of 2022

Counsel for Appellant/ Assessee: Meghna Lal and Vani Dwevedi

Counsel for Respondent/ Department: Rajashekhar. B. N. N, Superintendent

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