Case Note & Summary
The appellant, M/s. Deepak Fertilizers and Petrochemicals Corporation Ltd., is a manufacturer of excisable goods under Chapters 28, 29, and 31 of the Central Excise Tariff Act, 1985. It installed ammonia storage tanks at its premises at JNPT to store ammonia, which is used as a raw material for manufacturing final products at its factory in Taloja. The appellant availed CENVAT credit of service tax paid on input services such as consulting engineers, technical inspection and certification, construction, erection, commissioning, and installation services for the ammonia storage tanks. A show cause notice dated 31 July 2009 was issued demanding reversal of CENVAT credit of Rs. 2.78 Crores under Rule 14 of the CENVAT Credit Rules, 2004 read with Section 11A(1) of the Central Excise Act, along with interest under Section 11AB and penalty under Rule 15(A). After adjudication, the demand was confirmed with interest and a penalty of Rs. 5,000. The appellant appealed to the Customs, Excise and Service Tax Appellate Tribunal (CESTAT), which dismissed the appeal on 12 November 2012. The appellant then filed the present appeal before the Bombay High Court. The High Court framed two substantial questions of law: (i) whether the appellant is entitled to credit of service tax paid on input services received for setting up of storage tanks; and (ii) whether services used in relation to storage of inputs outside the factory are eligible for credit. The Court examined Rule 3(1) and Rule 2(l) of the CENVAT Credit Rules, 2004, which define 'input service' as any service 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. The Court held that the definition does not require that the service be received at the factory premises; it is sufficient if the service is used in or in relation to the manufacture of final products. Since the ammonia stored in the tanks was used as raw material for manufacture at the Taloja factory, the services were eligible for credit. The Court allowed the appeal, set aside the impugned order of the Tribunal, and directed that the CENVAT credit be allowed to the appellant.
Headnote
A) Central Excise - CENVAT Credit - Input Service - Storage of Inputs Outside Factory - The issue was whether services used for setting up ammonia storage tanks at JNPT (outside the factory) qualify as 'input service' under Rule 2(l) of CENVAT Credit Rules, 2004 - The Court held that the definition of 'input service' does not require that the service be received at the factory premises; it is sufficient if the service is used in or in relation to the manufacture of final products - Since the ammonia stored in the tanks was used as raw material for manufacture at the Taloja factory, the services were eligible for credit - The Tribunal's order was set aside (Paras 4-6).
Issue of Consideration
Whether the appellant is entitled to CENVAT credit of service tax paid on input services received for setting up of storage tanks outside the factory, and whether services used in relation to storage of inputs outside the factory are eligible for credit.
Final Decision
The appeal is allowed. The impugned order of the CESTAT dated 12 November 2012 is set aside. The CENVAT credit claimed by the appellant is allowed.
Law Points
- CENVAT credit eligibility
- input service definition
- storage of inputs outside factory
- place of receipt of service
- CENVAT Credit Rules 2004
