Order Date – 04 August 2022

Facts – 

• The appellant, M/s. Jai Balaji Industries Limited (Unit-IV), is engaged in the manufacture of Iron and Steel products.
• The appellants decided to set up a Coke Oven Plant for which they gave contracts to a number of service providers, who paid service tax and the appellants took credit of it as tax paid on ‘input service’.
• The department is of the view that the services were in the nature of “works contract services” which was excluded from .the definition of ‘input service’ under the Cenvat Credit Rules, 2004.
• Accordingly, three show cause notices were issued demanding total ineligible Cenvat credit of Rs. 1,93,93,204/-, for the period from April 2011 to July 2015. along with interest and equal amount of penalty. Being aggrieved, this appeal was filed.

Issue –

• Whether service tax related to modernization, renovation or repairs of an existing factory or plant falls under ‘input service’?

Order –

• The Tribunal observed that the provisions relating to Service Tax law underwent substantial changes the appellants were never put to notice with reference to the definition of “input service” and “works contract service” as applicable prior to 01-07-2012, thus the demand for the period prior to 01-07-2012 is clearly not sustainable.
• The services procured by the Appellants from various service providers were for the purposes of fabrication, erection, installation and commissioning of the Coke Oven Project which was not covered by the exclusion clause of the definition of “input service” [w.e.f July 2012]. 
• The Tribunal pointed that in Board‟s Circular No 943/4/2011-CX dated 09.04.2011, it was clarified that all services received for renovation and repair of factory or office would be eligible for credit by the recipient.
• The Tribunal relying on M/s Reliance Industries vs CCE &ST, Rajkot which is similar to that of the present case, held that any service relating to modernization, renovation of the existing factory is admissible as input service.
• Hence, the Appellants have rightly taken credit of service tax for services used for renovation plan of the existing plant/factory. Accordingly, set aside the impugned order.